Wall Street Earnings Indicators Weigh Heavily

As Wall Street investors ponder their strategies, the key driving factor is revenue earnings. Some argue this third quarter will show growth with a slight bounce upwards in GDP. There are signs that companies may report better earnings compared to the bottoms of last quarter (Q2) in the next week ahead.

However, we cannot discount the effects of lagging U.S. sectors such as the automobile industry that suffered severe cash-for-clunkers stimulus hangovers as sales plummet with GM down 45%, Chrysler (FIATY.PK) down 42%, and Ford (F) down 5%. Sobering statistics still persist in many sectors demonstrating that consumers are unable to propel significant growth without artificial government stimulus.

On the positive, more than 70% of S&P 500 companies beat expectations in the quarter, well above the 61% average for a typical quarter, mainly the result of heavy cost-cutting and not revenue growth.

Further, Wall Street Bulls argue the DOW has gained over 60% since March 2009, despite high unemployment rates (9.8%) and historically poor earnings. Additionally, looking at September manufacturing ISM numbers the second straight quarter of growth, recovery hopes still exist.

As we approach the holiday shopping seasons, the month of October is likely to be a tipping point that could provide us with a steady bounce upwards or the alternative dismal trend downward. Keep the focus-glued to next week’s key Wall Street earnings indicators including;

Alcoa Inc (AA) EPS estimates (-.12) reports Wednesday, Oct. 7 after the closing bell.

COSTCO Wholesale Corporation (COST) EPS estimates (.76) reports Wednesday, Oct. 7^th TBA.

Family Dollar (FDO) EPS estimates (.41) reports Wednesday, Oct.7 before market open.

Merix (MERX) EPS estimates (-.23) reports Wednesday, Oct.7 before market open.

Infosys Technologies LTD (INFY) EPS estimates (.5) reports Friday, Oct. 9 TBA.

Yum! Brands Inc. (YUM) EPS estimates (.58) reports on Tuesday, Oct.6 after market close.

Marriott International Inc. (MAR) EPS estimates (.13) reports Thursday, Oct. 8 before market open.

Monsanto Company (MON) EPS estimates (.01) reports Wednesday, Oct.7 before market open.

PepsiCo (PEP) EPS estimates (1.02) reports Thursday, Oct. 8 TBA.

Also keep your eye on technology sector companies like Microsoft Corp (MSFT) set to launch its new operating system WINDOWS 7 in October - it stands to benefit from the dollar's weakness.

Overall the data shows S&P 500 Q3 earnings declining 24.8% from a year ago, compared with Q2, 27.3% decline. Many expect the financial sector to show the highest growth rate of any S&P 500 sector, followed by consumer discretionary spending, while materials should have the lowest earnings growth rate. Along with a stronger economy, the falling dollar was also seen as providing a boost to corporate earnings.

Perhaps, its all relative as the numbers technically are getting slightly better, very slowly. It is prudent now to take notice of the Wall Street BUYER BEWARE signs out there specifically within the month of October. The question remains of whether Wall Street equity investors will be satisfied with anemic earnings or pull-back looking for greener pastures in accelerating emerging markets or commodities.

One fact we can surely count on - there will be no large jump overall in corporate earnings for quite some time as U.S. consumers fearful of unemployment and heavily in debt hunker down. Finding a way for this unstable market to financially walk on its own without artificial stimulus becomes particularly critical as the Federal Reserve mulls over its necessary exit strategy of gradually rising interest rates - more than likely beginning in early 2010, after the holiday seasons.

DISCLOSURE: NONE

Comments

[TradingHelp...:]

"However, we cannot discount the effects of lagging U.S. sectors such as the automobile industry that suffered severe cash-for-clunkers stimulus hangovers as sales plummet with GM down 45%, Chrysler (FIATY.PK) down 42%, and Ford (F) down 5%. Sobering statistics still persist in many sectors demonstrating that consumers are unable to propel significant growth without artificial government stimulus."

Very true. As the stimulus impact fades it is hard to see how the consumer will pick of the growth baton with unemployment at 9.8% and rising.

Oct 05 05:04 AM

[BlueOkie:]

Cash for clunkers was a social program not a economic one. We may have boosted new car sales but hurt used cars and auto part store sales. It was nothing more than a transfer of wealth using taxpayer dollars. Why should I give $4500 to my neighbor to buy a new car?

Oct 05 08:26 AM