More to that end....
Great sell signal article..(I have found these look ahead-type articles to be great contrarian indicators for the coming week) nothin but blue skies.. la la la
Note that the article briefly discusses Brazilian concern at the end but then blows it off cause stocks are splitting their shares. ROFLMAO.
Earnings May Drive Stocks Higher: U.S. Stocks Outlook
Bloomberg News
Jan 31 1999 4:44AM ET
Earnings May Drive Stocks Higher: U.S. Stocks Outlook
New York, Jan. 31 (Bloomberg) -- Halfway through the fourth- quarter earnings reporting season, analysts and investors say they are pleasantly surprised by most company reports -- and that may push stock prices higher in coming weeks.
With 333 of the companies whose shares make up the Standard & Poor's 500 Index having reported so far, 53 percent surpassed analysts' expectations, according to First Call Corp. That tops the 49 percent that had beat forecasts at this time last year.
And after a dismal third quarter, where profit from operations declined by 3 percent on a year-over-year basis, the first contraction in eight years, First Call is expecting earnings to grow as much as 5 percent for the final quarter of 1998.
''Earnings bombed out in the third quarter and actually reaccelerated in the fourth quarter,'' said Louis Navellier, president of Navellier & Associates, which oversees about $2 billion. ''It looks awfully good'' for stocks this year.
The Dow average rose 2.6 percent last week, its first gain in three weeks, while the Standard & Poor's 500 Index gained 4.4 percent. The Nasdaq Composite Index soared 7.1 percent, its biggest jump in 16 weeks. The Russell 2000 Index of small stocks continued to lag, rising 1.1 percent.
Tearing World Apart
Earnings from computer-related companies in particular increased investor optimism and bolstered the outlook for stocks. Those reporting unexpectedly strong profit included Intel Corp., the world's top computer-chip maker; Broadcom Corp., the leading maker of cable-modem chips; and America Online Inc., the No. 1 Internet service.
America Online Inc., the No. 1 online service, raised investor confidence on Internet stocks by reporting fiscal second-quarter profit almost quadrupled, beating estimates.
Earlier this month, Microsoft Corp. became the first U.S. company with a market value exceeding $400 billion after it reported second-quarter profit rose 75 percent, beating estimates, on increased sales to companies.
''Technology is continuing to tear the world apart,'' said Art Bonnel, a portfolio manager with the Bonnel Growth Fund, which oversees $110 million. ''Profit margins are high, and it's an area you have to be in.''
Companies with good news for investors easily outpaced the 20 percent whose earnings lagged estimates.
''The assumption was that fourth-quarter earnings would be weak, but we are seeing growth,'' said David Mead, chief investment officer at Harris Bank in Chicago, which oversees $25 billion. ''Analysts had knocked them down too much.''
'Room to Surprise'
Fourth-quarter profit growth expectations for the companies making up the S&P 500 went to 2.7 percent on Dec. 29 from 16 percent on July 1. On Jan. 11, as earnings reports began, they rose to 3.4 percent.
Because forecasts had been reduced so much, some investors said they weren't impressed that companies are beating estimates.
''Expectations were brought down and this gives them room to surprise ,'' said Tim Ghriskey, senior portfolio manager at Dreyfus Corp., which manages $120 billion.
Ghriskey favors technology stocks, speculating that they will exhibit the greatest earnings growth this year. His picks include International Business Machines Corp., Compaq Computer Corp., Intel and Xerox Corp.
Money managers said they are encouraged that the U.S. economy is giving a boost to earnings and stock prices, even for older industrial companies. For example, Minnesota Mining & Manufacturing Co., which makes more than 50,000 products ranging from Post-it Notes to copper roofing, reported earnings of 86 cents a share, beating analysts' expectations by 6 cents.
Bellwether
3M's ''earnings growth is said to be heavily tied to U.S. GDP growth, so better earnings from them may indicate the economy is better than we think,'' said Ghriskey.
Georgia-Pacific Group, the second-largest U.S. maker of plywood and paper, had an unexpected fourth-quarter profit as a robust housing market boosted shipments and prices for many construction materials.
Both General Motors Corp. and Ford Motor Co., the world's No. 1 and No. 2 carmakers, reported better-than-expected earnings. Car and light truck sales rose 2.6 percent in 1998 to 15.5 million units, their strongest year since 1986, according to Doug Porter, senior economist at Nesbitt Burns Securities Inc. in Toronto.
The Commerce Department Friday confirmed what those earnings reports suggested: The U.S. economy surged to a 5.6 percent growth rate in the final three months of 1998, above the 4.5 percent forecast. It was the highest rate in more than two years.
The report reinforced other positive indicators: Housing starts last year were the highest since 1987, while the rate of home ownership rose to a record 66.3 percent in 1998, according to government statistics. Consumer spending was the strongest in 14 years, while inflation was the tamest in half a century.
Brazil
The caveat for U.S. investors is the effect of Brazil's weakening finances on corporate profits. Brazil's plunging currency and rising interest rates reduce the prospects for a recovery in Latin America's largest economy anytime soon.
Whirlpool Corp., the world's top maker of big appliances, beat the average fourth-quarter earnings estimate by a penny. Yet it also warned that Brazil's slumping economy may pull first- quarter profit below forecasts.
In another troubling sign, 78 S&P 500 companies issued profit warnings for the fourth quarter, a 47 percent increase over profit warnings in the third quarter.
First Union Corp., the sixth-largest U.S. bank, warned last week that 1999 earnings would be reduced by a slowing economy and higher expenses.
Still, investor optimism was lifted by news of stock splits for such companies as Microsoft, Intel, IBM, Xerox, AOL, McDonald's Corp., Pfizer Inc. and Amgen Inc.
Companies typically split their stock to keep shares affordable for small investors. While splits don't create wealth but rather redistribute a company's equity over more shares, investors perceive them to be bullish. Corporate boards aren't likely to lower their company's share price if they expect the market to do so already. --Nick Olivari in the New York newsroom (212) 318-2849, with reporting by Phil Serafino and Beth Williams in New York/ltk Story illustration: For indexes on S&P 500 EPS surprises and estimates, enter SPEQ or SPED . For a graph and chart of an individual company's earnings type ticker symbol
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