New York Market: Company reports feed optimism
Sunday 31 January 1999
And after a dismal third quarter, where profit from operations declined by an annual 3 per cent, earnings are expected to grow as much as 5 per cent for the final quarter. "Earnings actually reaccelerated in the fourth quarter," said Louis Navellier, of Navellier & Associates. "It looks awfully good [for stocks this year]".
The Dow average rose 2.6 per cent last week, its first gain in three weeks, while the S&P's 500 gained 4.4 per cent. The Nasdaq soared 7.1 per cent.
Earnings from computer-related companies in particular have bolstered the outlook for stocks. Those reporting unexpectedly strong profit included Intel, Broadcom, maker of cable-modem chips and America Online. "Technology is continuing to tear the world apart," said Art Bonnel, fund manager with the Bonnel Growth Fund. "Profit margins are high, and it's an area you have to be in."
Companies with good news easily outpaced the 20 per cent whose earnings lagged estimates. "The assumption was that fourth-quarter earnings would be weak, but we are seeing growth," said David Mead, at Harris Bank in Chicago. "Analysts had knocked them down too much."
Because forecasts had been reduced so much some investors said they weren't impressed that companies are beating estimates. "Expectations were brought down and this gives them room to surprise," said Tim Ghriskey, manager at Dreyfus.
The booming economy is boosting earnings and stock prices, even for older industrial companies. Both General Motors and Ford reported better than expected earnings.
Growth surged 5.6 per cent in the fourth quarter, above the 4.5 per cent forecast - the highest rate in more than two years.
The caveat for US investors is the effect of Brazil's weakening finances on corporate profits. Brazil's plunging currency and rising interest rates reduce the prospects for a recovery in Latin America's largest economy. In a troubling sign, 78 S&P 500 companies issued profit warnings for the fourth quarter, a 47 per cent increase over profit warnings in the third quarter.
- 1 Reader dilemma: 'My boyfriend jokes about putting photos of us having sex on Facebook'
- 2 Kenya President Uhuru Kenyatta clashes with President Obama on LGBT equality: ‘Gay rights is really a non-issue’
- 3 Ralkina Jones: 37-year-old black woman found dead in police custody
- 4 Kanye West praises Caitlyn Jenner on I Am Cait: 'You couldn't have been up against more'
- 5 Five-year-old boy forced classmate to simulate oral sex at primary school, claims mother
Mystery over deaths of 3,000 Napoleonic soldiers in mass grave has been solved
Global Peace Index: Ukraine tops list of countries with the worst relations with neighbours
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
Rolling Stones guitarist Keith Richards, 71, still enjoys 'an early morning joint' for breakfast
Denmark bans kosher and halal slaughter as minister says ‘animal rights come before religion’
The 9 charts that show the 'left-wing' policies of Jeremy Corbyn the public actually agrees with
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
The last thing Labour needs is a leader like Jeremy Corbyn who people want to vote for
What the Labour party could look like under Jeremy Corbyn
I am the Jeremy Corbyn supporter that many will tell you doesn't exist
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
iJobs Money & Business
£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...
£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...
£30000 - £35000 per annum + benefits : Ashdown Group: Finance Accountant - Fin...
£90000 - £98000 per annum + benefits : Ashdown Group: A truly exciting opportu...