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To: Jim McMannis who wrote (14511)	7/15/1998 3:10:00 PM
From: Alex	Respond to of 116756

Era of US prosperity may be drawing to an end <Picture><Picture><Picture><Picture> The market bulls who predicted this crucial earnings season would kick off the long-awaited summer rally on Wall Street are largely silent now as America heads for what could be the worst earnings season in nearly a decade. With a record number of companies saying their numbers will not meet targets, investors are realising that this earnings period will be different to those of the recent past when only a handful of companies warned they would not make estimates, analysts downgraded too far and then, when the firms beat the Street, shares rebounded. Even the first quarter, which with a 3.8% rise for the S&P 500 companies was hardly robust, did not disrupt because there were pleasant surprises to keep market momentum going. This time, the upside exceptions - such as Whirlpool, Hertz, Chrysler and Pfizer - are seriously outnumbered. Analysts expect the S&P 500 companies' second-quarter growth to be 1.5%, the worst since the last recession. Two weeks ago, the consensus was for 5% growth and that was only a third of what was expected at the start of the quarter. Although some market indices are hitting highs, the climb is hesitant. Investors would have to be nuts to send the market up for a sustained period at a time when company profits are sliding South faster than Bill Clinton's accent when he talks to a group of Good Old Boys. Suddenly, Dresdner Kleinwort Benson's bearish view of flat profits in America this year has as much chance of being realised as the more bullish consensus of an overall 9% rise. Already a record 378 companies have warned of disappointments in the next few days, according to Boston research company First Call. Semiconductor makers, retailers, property and casualty insurers and General Motors' suppliers are being downgraded on a daily basis. There are bright spots. Airlines and brokers are beating Street estimates and signs of change in Japan have raised hopes the hi-tech sector might improve. The large cross-section of companies in earnings trouble reflects both the slowdown in economic growth and the broadening negative impact of Asia's recession. That drag first showed in US corporate profit numbers in the last quarter of 1997. Now US companies are telling investors that business there may not recover for months. Surveying the future brings no solace. At the beginning of the year, strategists had expected a 15.1% increase in year-on-year profits in the third quarter for the S&P 500 companies. Now they forecast 9.1%, and that target is falling almost daily. The fourth quarter was once expected to produce a profit boost of 19% from last year. Now, projections are for 15%. Beyond the S&P 500, the situation is worse. According to Government figures, overall US business reported declines in the last two quarters. A third similar quarter seems likely. It must, therefore, be asked whether the slump is not just a delay in profit recovery but the start of a long-term trend in a country that does not want to face up to the fact that seven years of prosperity are winding down. c Associated Newspapers Ltd., 15 July 1998 This Is London <Picture: IBM> <Picture: Go Back> ÿ thisislondon.co.uk