World Business
US frims' confidence improves
(Agencies)
Updated: 2010-04-09 15:43
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NEW YORK: US corporate earnings should top forecasts again in the first quarter, but the extent of the stock market's rally means investors are expecting a lot from companies.
Standard & Poor's 500 companies' first-quarter profits are seen up 36.8 percent versus a year ago, which would be a second straight quarter of year-over-year profit growth, according to Thomson Reuters data. The fourth quarter marked the first of year-over-year gains since 2007's second quarter.
"We're going to see a healthy number of positive earnings surprises," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. "We're seeing stronger economic data than what we expected, and that should translate into a little bit better revenue growth."
Still, investors are anxious to see if companies can beat expectations enough to push stock indexes even higher. The S&P 500 now is up 75.4 percent from its March 2009 closing low.
But strategists say much of the enthusiasm for quarterly profits may already be factored into lofty stock prices.
Stocks could be in danger of repeating the previous earnings period, when investors would sell even after strong reports. The S&P 500 lost roughly 3 percent during earnings season.
"I don't think (earnings) will move the needle," said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.
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Of late, momentum indicators and short-term moving averages suggest the major indexes are becoming overextended.
The Dow Jones industrial average and the S&P 500 are at 18-month highs, and the Dow has come close to hitting the 11,000 mark.
Historically, the market performs better in the off-earnings season than during earnings, according to Bespoke Investment Group of Harrison, New York.
The S&P 500 is up 6.8 percent since the last earnings season ended.
