Slow growth rallies stocks
Sunday 12 April 1998
Stocks are likely to rise because the analysts who work for big Wall Street firms typically cut their earnings forecasts by too much just before reports come out. That tendency has been especially pronounced this quarter as analysts fretted about the impact of Asia's slowdown.
Many investors expecting the worst could be pleasantly surprised by the profit reports. That means further gains for a market that already rose more during the year to date than many expected for the entire year.
"We don't see any end to the bull market," said Marshall Front, managing director of Trees Front Associates in Chicago. "As long as the outlook for corporate profit growth is good, the market's probably going to do well."
The Standard & Poor's 500 Index fell 1 per cent last week - its second losing week in the last three, though only the fourth weekly decline this year. The benchmark for the US stock market is up 14 per cent for the year. The Dow Jones Index, which closed above 9,000 for the first time Monday, rose 0.1 per cent for the shortened week. The technology-packed Nasdaq Composite Index dropped 2 per cent.
Stock prices struggled as pessimistic investors sold before the earnings reports. Semi-conductor stocks performed the worst after Advanced Micro Devices reported a larger than expected loss and Motorola said its profit was smaller than forecast.
Earnings scheduled for Monday include General Motors and NationsBank; Tuesday's line up includes Coca-Cola and JP Morgan; BankAmerica reports on Wednesday; Compaq Computer and Ford on Thursday; and Lucent Technologies on Friday.
"In an environment of continued moderate inflation and a very low probability of any sustained increase in interest rates, financial stocks should continue to do well," said Mr Front.
Some of the worst performing stocks in recent months should benefit from a growing sense that the greatest damage from Asia's slowing economies and devalued currencies has been done. "Commodity" technology stocks should see business improving by the summer or autumn, Mr Front said. That means analysts will be raising their ratings on the stocks in coming weeks, hoping to get their clients to buy the stocks just before they surge in price.
Still, earnings growth is likely to pick up as the year progresses, boosted by steady growth in the US and low inflation, which is expected to keep interest rates low.
Copyright: IOS & Bloomberg
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
- 5 Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
Jihadi John': MI5 may have identified Isis militant who killed David Haines but options limited
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: Police will be on high alert on Friday whatever the result
David Haines beheading: David Cameron says Britain will hunt down Isis 'monsters' shown in video murdering aid worker
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...