What's going on?

Shares of Caterpillar, the industrial manufacturing conglomerate, jumped over 5%, after the company reported stellar results for the second quarter of this year and raised its forecast for the rest of 2017.

What does this mean?

Caterpillar is a company that develops and manufactures diesel locomotives, mining equipment, gas engines and industrial turbines. Its stock is a major component of two of the most well-known stock indices in the US: the Dow Jones Industrial Average and the S&P 500. As one of the earlier companies to report this earnings season, Caterpillar results are typically interpreted by Wall Street as a bellwether for the performance of the entire global economy, particularly in the manufacturing sector.

Why should I care?

For markets: Caterpillar�s results are part of a wider rally for stock prices.

Caterpillar�s stock price jumped to an all-time high following its results beating expectations on every major financial metric (e.g. revenues). More broadly, US stock markets are reaching record highs. This is part of a wider trend where investors are buying riskier investments, like stocks, whose prices tend to fluctuate more dramatically than, say, government bonds.


The bigger picture: Could the global economy be at a turning point?

Caterpillar’s results are key to understanding the global economy given the wide geographic scope of its business. China, in particular, has been a major concern in light of a stalled construction boom over the last 2 years. The earnings beat from Caterpillar may reassure investors that the global economy is indeed picking up steam � which should be supportive for the prices of raw materials like copper and oil (among other things).