US Second Quarter Earnings Roundup

by Dollars and Sense

From the New York Times' Site:

U.S. Second-Quarter Earnings Tough to Beat

By REUTERS
Published: August 30, 2009

NEW YORK (Reuters) For corporate America and Wall Street, the second quarter may be a tough act to follow.

Just as investors were closing the book on second-quarter earnings, Dell Inc (DELL.O) drew them back in by accidentally releasing earnings that beat expectations just minutes before Thursday's closing bell.

Despite this minor misstep by Dell, the world's No. 2 personal computer maker, investors reacted to the news the way they did to many other pleasant surprises this quarter--by hungrily snapping up Dell's stock and lifting tech shares.

This was the pattern throughout the latest earnings period, as a bevy of surprises provided the fuel to drive the benchmark Standard & Poor's 500 Index (.SPX) up 11.5 percent since July 1. The rally lifted the S&P 500 to a 10-month high this week.

Intel Corp (INTC.O), which reported quarterly results that surpassed expectations last month, surprised the Street again on Friday morning by raising its revenue outlook.

But the broader market's initial euphoric response to the news soon fizzled. That left participants wondering: In the dearth of earnings, what will push stocks higher from here?

"This market has about as much good news baked into it as it can take," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

"We're at that point now where there is no more good news that could come out that can really juice this market."

For the past week, the S&P 500 rose 0.3 percent, while the blue-chip Dow Jones industrial average (.DJI) gained 0.4 percent. The Nasdaq Composite Index (.IXIC) also finished the week up 0.4 percent.

MORE REALISTIC MOOD

With just a handful of companies left to report, the S&P 500's second-quarter earnings are projected to decline 27.3 percent from a year ago, according to Thomson Reuters data. That compares with a forecast for a 36 percent decline from the year-earlier quarter at the start of the earnings period, and a 35.5 percent drop in the year's first quarter from the same period in 2008.

Some 73 percent of the companies that reported results beat estimates, well above the 61 percent average for a typical quarter, Thomson Reuters data showed.

Wall Street used the abundance of positive surprises as the catalyst to keep the stock market's rally going.

But it remains to be seen whether the broad market's buoyant reaction can be repeated in coming weeks.

Intel shares rose sharply, and boosted semiconductors, but the market itself struggled on Friday.

And even glittering results from jeweler Tiffany & Co , which reported a higher quarterly profit on Friday in tandem with cost cutting, could not get the market excited.

Analysts say expectations are not as dire as they were when headed into the second quarter. Estimates are for third-quarter earnings to decline 20.8 percent from a year ago. The change in expectations may reduce the impact of positive earnings guidance, which will start to trickle out in a few weeks' time.

"I don't think we will get surprises of the magnitude we got in the second quarter," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, in Albany, New York.

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Labels: corporate profits, economic indicators, financial crisis

 

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8/30/2009 03:21:00 PM