Sparkling Profits, Then a Deceleration

[Dover]

Sparkling Profits, Then a Deceleration

Sat May 29, 2004 07:22 AM ET


NEW YORK (Reuters) - Corporate profit growth is due to slow in the second half of the year, but stocks are still likely to offer investors steady gains that will outshine bonds and other investments, Wall Street analysts say.

The much-anticipated profit slowdown has sparked worries that the bull market of the past 18 months could be coming to an end. But that thinking may be premature, the analysts say, since there is at least one more quarter of solid gains still to be reported.

Moreover, many are betting that even after the profit slowdown Wall Street could be headed for a "soft landing" -- a healthy period of more moderate growth.

Companies' performance for the second quarter is shaping up as a replay of the strong first quarter, the analysts said. Right now the companies in Standard & Poor's 500 Index are projected to boost profits by 18 percent versus 2003's second quarter, according to Reuters Estimates.

But some companies are sure to beat forecasts, as they did in the first quarter of 2004, said Ashwani Kaul, senior market analyst at Reuters Research. As a result, the 18 percent projected rise "will probably reach 25 percent once all the companies have reported" by late August, he said.

The second quarter may even set a peak for earnings, possibly just topping the 25 percent gain in the first quarter, Kaul added. Companies will start to announce any misses of second-quarter earnings forecasts in a couple of weeks, and the actual earnings reports will begin in mid-July....Cont'd >

http://tinyurl.com/2kq7s

(scratching my head)

[Norquist Nemesis]

1. Time for another easing of the tax burden. </sarcasm> n/t

[Cooley Hurd]

2. ...or time for more outsourcing.

...damn salaries cut into profits!

[Dover]

3. Economic Data to Call the Shots

Economic Data to Call the Shots

Sat May 29, 2004 By Elizabeth Lazarowitz

NEW YORK (Reuters) - Wall Street will be waiting on a batch of key economic data next week. But what's good for the economy may not be good for stocks as investors fret over the potential for a Federal Reserve interest-rate hike.

A report on the health of the U.S. manufacturing sector, due on Tuesday, and another on the number of U.S. jobs created in May, due on Friday, bookend a four-day week shortened by the Memorial Day holiday on Monday.

The economy has shown signs of surprising strength in recent months, but indications that inflation may be rearing its ugly head -- particularly as oil prices hit record highs -- have put stock investors on edge.

With the Fed's next policy-setting meeting just a month away, Wall Street is on watch for any clues to how much and how soon the central bank will begin lifting the benchmark fed funds rate from 1 percent, its lowest level since 1958.

Particularly strong data could heighten fears of aggressive rate hikes by the Fed, which could dent spending by individuals and businesses as borrowing costs rise.

"We seem to be in a 'good news is bad news' environment, at least on the economy," said Lincoln Anderson, chief investment officer at LPL Financial Services. "There's so much concern about Federal Reserve tightening, and the impact on the bond market, and through the bond market to stocks." .....MORE

http://tinyurl.com/2otl7

[AP]

4. Profits came this year from tax cuts on same income. Since you really

can't cut corporate tax burden much more, and since the tax cuts aren't trickling down their benefits, it's not clear where businesses will derive any more profits.

[teryang]

5. Marketing efforts appear

...to be getting desperate. Bigger rebates on everything from computers to cars. My mailbox is stuffed with more junk mail offers from all over the country than I have ever experienced in my life. Fidelity begs please buy our funds, no load on everything.

Most people don't have the money to buy. They could borrow more but on lower pay, they can't make the payments.

I think a lot of people don't understand the impact of demographics and college and medical costs. Now we have to contend with the additional impact of increased fuel costs.

[bemildred]

6. Yup, it's always a good time to buy stocks. nt

[sendero]

7. "bull market of the last 18 months"....

... that's a bit of a stretch isn't it?