Posts Tagged ‘GDP growth’
While the focus is on the government shutdown and debt ceiling, I’m getting ready for the start of another earnings season, to see if America delivers. Of course, the somewhat muted gross domestic product (GDP) growth has me fully expecting to see a drag in revenues across the broad.
Alcoa Inc. (NYSE/AA) starts the third-quarter earnings season when it reports after the markets close tomorrow. The company is a pretty decent indicator for the global economy, as aluminum is used in a broad assortment of industrial and consumer applications around the world.
The company is forecasted to earn $0.06 per diluted share on revenues of $5.71 billion, down 2.1% year-over-year, according to Thomson Financial. For this reporting year, Alcoa is expected to see revenues contract 2.8%, followed by 2.8% growth in 2014. This essentially means zero growth over two years. In my books, that’s not good; this clearly indicates a global economy that’s in trouble.
I don’t even think traders are expecting some miraculous jump in revenues or earnings in the third-quarter earnings season. Wall Street has already downgraded expectations for the earnings season.
Earnings growth for the third-quarter earnings season is estimated at 3.2%, according to a FactSet report dated September 27. (Source: “Earnings Insight,” FactSet Research Systems Inc. web site, September 27, 2013; last accessed October 4, 2013.) The number is well down from the estimate of 6.5% as of June 30.
The financial sector is expected to report the top growth, while the healthcare sector is projected to report the lowest level of growth in the third-quarter earnings season. Of course, should the U.S. government shutdown … Read More
Analysts and investors demand clarity when a company reports or offers up guidance. But when it comes to the Federal Reserve, investors and analysts don’t seem to demand the same level of clarity, even though the central bank has been what I would label “wishy washy” as far as its policies and what it offers up to the market.
The stock market is trading (and it has been for a while) on what the Federal Reserve says about its quantitative easing program, namely its monthly bond-buying strategy.
Yet the Federal Reserve appears to be saying one thing, only to contradict it with the next statement. This type of confusion and uncertainty is not what I want to hear. I want more certainty in order to formalize my trading and investment strategy. The cloudiness offered by the Federal Reserve doesn’t help.
Case in point: at last week’s Federal Open Market Committee (FOMC) meeting, Federal Reserve Chairman Ben Bernanke, to the surprise of nearly everyone both on Wall Street and Main Street, announced that the bank had decided against tapering, despite what I see as moderate growth in the economy. Yes, the country continues to slug along, but with the second-quarter gross domestic product (GDP) growth at 2.5% and with the Federal Reserve estimating the country will continue to expand at a rate above two percent this year and in 2014, the Federal Reserve should have begun to rein in some of its bond buying. Pundits were estimating a $10.0-billion cutback to start.
Well, even that small cut didn’t happen. Bernanke said the economy was still fragile, and the Fed didn’t … Read More
In my view, this is the new reality in the retail sector. And it’s not only hurting the retail sector, but it is also supporting an increase in traffic at the major discount mall operators, such as Tanger Factory Outlet Centers, Inc. (NYSE/SKT) and king of discount malls Simon Property Group, Inc. (NYSE/SPG), which owns the well-known Premium Outlets centers.
If you haven’t been to the Premium Outlets malls, these are large malls where there are as many as 100 stores offering quality goods at cheap discount prices. All of the major retailers are there.
Yet the retail sector continues to show mixed results that clearly do not suggest consumer spending is rising at levels the economy wants to see, given the low interest rates.
Retail sales in July were better than expected, but in my view, they still don’t support a massive spending push in the retail sector, which means potential problems brewing for America’s gross domestic product (GDP).
We are beginning to see weakness amid the department stores in the retail sector. There was even a disturbing report from bellwether retail giant Wal-Mart Stores, Inc. (NYSE/WMT), which reported dismal growth in the U.S. and around the world. When this happens, you know all is not right in the retail sector, as Wal-Mart is a good barometer of consumer spending activity.
So it wasn’t a surprise to see department store Macy’s, Inc. (NYSE/M) fall short in its fiscal second … Read More
If everything is so fine with the economic recovery in both America and the global economy, then why are the emerging markets failing to rebound? It seems somewhat odd how the global economy could be fine when its key trading partners in the emerging markets are not.
You all know how much I like the emerging markets longer-term. (Read “Think Global for the Best Investment Opportunities.”) However, the short- to mid-term is another story, as there’s clearly some stalling.
The HSBC Emerging Markets Index (EMI) declined to a contractionary 49.4 reading in July, versus an expansionary 50.6 in June. This was the first contraction reading since 2009.
The HSBC reading is also a red flag to the stock market that, as I have been saying in recent commentaries, is showing some cracks in its foundation.
If the U.S., Europe, and China are fine, then the emerging markets should be too—but they’re not fine, so you should be wary of this. A pickup in the emerging markets is needed to get the ball rolling on economic growth.
As shown on the iShares MSCI Emerging Markets (NYSEArca/EEM) exchange-traded fund (ETF), the emerging markets have been under some duress since peaking in May, based on my technical analysis.
Chart courtesy of www.StockCharts.com
Here’s what’s happening at this juncture:
GDP growth in China has stalled, holding above seven percent. The manufacturing sector may be contracting, that is if you believe the HSBC estimate over the official estimate from Beijing, which says manufacturing is expanding.
Then you have the dismal state of affairs in the eurozone and Europe. Six of the 17 eurozone … Read More
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