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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (71631)	11/25/2007 12:15:58 AM
From: RealMuLan	Respond to of 116555

Large-cap US multinationals: From darlings to dogs ftalphaville.ft.com Investors are losing their appetite for US multinationals amid mounting worries that the weak dollar and global growth will fail to offset a slowing domestic economy, reports the FT on Friday. The market’s lack of enthusiasm for companies that had underpinned recent rallies highlights growing pessimism over the prospect that exports and global trade would help large US companies weather a slowdown in their home market. With US-focused sectors such as financial services and consumer products reeling from the housing downturn and credit squeeze, the new concerns over multinationals are forcing analysts to further downgrade their earnings forecasts. In the first six months of the year, corporate America’s foreign profits rose at an annual rate of 15 per cent, outpacing domestic earnings growth and prompting investors to buy into multinationals as a hedge against a US slowdown. But over the past month shares of international companies such as General Electric, 3M, UPS, Exxon Mobil and Intel have suffered some of the biggest losses among large-cap companies. “Large-cap US multinationals, the darlings of the investment world for most of this year, have been roughed up over the past few weeks. More trouble lies ahead,” wrote Joseph Quinlan, chief investment strategist at Bank of America, in a note to clients this week. “US corporate earnings, supported earlier by strong global growth and a weak US dollar, succumbed to . . . deteriorating economic conditions at home”. Investors blame disappointing earnings and forecasts from large companies such as the heavy equipment maker Caterpillar, the logistics giant FedEx, and the technology group Cisco, for the change in sentiment. The results dashed hopes that overseas earnings might help companies compensate for falling consumer confidence and business spending in the US — a key reason for investor flight to multinationals earlier this year, notes the FT report. Wall Street expects earnings of S&P 500 companies to have risen just 3.1 per cent in the last three months of 2007, according to Bespoke Investment Group. At the start of October, analysts were expecting fourth quarter earnings to increase more than 11 per cent, according to Thomson Financial. But some economists argue that the prospects of an export-led recovery in the US were always remote given the domestic economy’s reliance on consumer spending.