more on MARKET EARNINGS from First Call
If you thought the pace of downward revisions were going to decelerate as we neared the holiday season, it is not happening yet. Just since last week, expectations for earnings growth for the S&P500 have dropped from 10.0% to 8.4% for 4Q00, from 10.5% to 9.5% for 1Q01, and from 9.4% to 8.6% for 2Q01. For the full 2001 year, the drop was from 11.5% to 10.7%. All of these current expectations are likely to go significantly lower, particularly in the first few weeks of January when the info slowdown during the holiday period is over.
Therefore, any Santa Claus rally in the market could be a bear trap. Until the market has better visibility on when earnings growth may bottom and how deep that bottom may be, it is unlikely there will be a sustained rally. That likely will not happen until we at least get through the first few weeks of January.
The expectations for the S&P500 technology sector dropped from 14% to 11% for 4Q00 and from 17% to 15% for the full 2001 year. As the biggest sector in the S&P, the downward revisions in the tech sector are the biggest factor in the decline in the overall numbers, but with considerable help from consumer cyclicals, and to a lesser extent the basic materials (papers, metals, chemicals). The capital goods sector, which normally lags, is now starting to contribute to the downward revisions. |
