Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Stock Market: Will it Heed the Warnings?

Friday, September 21st, 2012
By for Profit Confidential

Stock MarketBoth global and domestic economic reality is setting in, with more earnings warnings and weak economic data, particularly from China. Chinese stocks are currently taking it on the chin.

For the last few quarters, railroad companies have been reporting declining volumes of coal, partially due to a slow U.S. economy but mostly because of cheap natural gas prices. Norfolk Southern Corporation (NYSE/NSC) announced that its third-quarter earnings will be lower than its 2011 third-quarter earnings, mostly due to volume declines of coal and merchandise. Third-quarter revenues are also expected to be down about $120 million from the previous year.

Concerning the stock market, there hasn’t been much of a pullback since the Federal Reserve met expectations with its announcement that there would be a third round of quantitative easing (QE3). And while there have been some meaningful earnings warnings for this upcoming earnings season, there’s an equal amount of good news as well.

Norfolk Southern Corp Chart

Chart courtesy of www.StockCharts.com

NIKE, Inc. (NYSE/NKE), for example, announced another share buyback program, totaling $8.0 billion over the next four years. The company is just wrapping up a $5.0-billion share buyback program, and over the last 10 years, it has purchased some $10.0 billion of its own shares, representing over 167 million shares.

On the stock market, NIKE’s share price hit an all-time record high of $114.81 in May of this year. The stock pulled back with the rest of the stock market, and then made a nice recovery to its current level around $100.00 a share. (See “Stock Market Trading Action Signals Breakout Coming.”)

  • He Beat the Market Eight Times Over Last Year!

    His Top 19 Picks Averaged a Gain of 216.23% in 2013 at their price highs... But Michael Lombardi's upset because his picks averaged a better gain in 2009! Now he's promising to make 2014 his best year ever for making money in the stock market!

    Story and Michael's weekly stock-picks here.

Nike Inc Chart

Chart courtesy of www.StockCharts.com

We’re going to see more and more of this going into 2013—more share buybacks and more dividend increases. Earnings might not be growing, but they are relatively stable, and instead of investing in new plants, equipment, and employees, corporations would rather just return shareholders’ money and/or reduce their shares outstanding. It’s an effective strategy for corporations to keep stock market investors happy in such an uncertain economy. It’s not necessarily so effective for improving the Main Street economy, and we see this in the job numbers.

Microsoft Corporation (NASDAQ/MSFT) is another big-name company that recently increased its dividend to shareholders. The company announced that it will increase its quarterly dividend to $0.23 per share, up from the previous level of $0.20. Street analysts have been lowering Microsoft’s earnings estimates for upcoming quarters, but the company has the cash to keep stock market investors happy—about $62.0 billion worth or $7.40 per share.

As I’ve been saying, the stock market is a little ahead of economic reality, especially with China’s economic news showing such a dramatic slowing. This earnings season is likely to be like the previous one—choppy with a good degree of restraint in terms of visibility. As for the stock market, investors like to be ahead of the current reality; my outlook is very subdued, because earnings aren’t growing.

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. is a Senior Editor at Lombardi Financial specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. Add Mitchell Clark to your Google+ circles

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.