Posts Tagged ‘GDP growth’
Market Near Record High, but Where’s the Revenue?
By George Leong, B.Comm. for Profit Confidential
What’s all of this fuss about earnings helping to drive up the stock market?
The first-quarter earnings season has been OK, but not great. Maybe the market is fine with average results and pleased there have not been major surprises to the downside.
First-quarter gross domestic product (GDP) expanded at an annualized 2.5%—pretty good considering GDP rose a muted 0.4% in the fourth quarter, but it was still short of the Briefing.com estimate of 2.8% for the first quarter. (The global economy is also showing some fragility, which you can read about in “Caution: Market’s Strength Is False.”)
And there are whispers that GDP growth will slow in the second quarter.
In my view, the lack of strong and sustained GDP growth suggests corporate America is also struggling to increase business volume.
The evidence is in the first-quarter earnings season.
Let’s take a look:
So far as of Friday, 235 of the S&P 500 companies have reported this earnings season; about 68% have managed to beat Thomson Financial earnings-per-share (EPS) consensus estimates—in line with the recent quarters. That’s the good news.
The problem that I see is on the revenue side, which makes some sense, given the GDP.
Of the 102 S&P 500 companies that had reported their first-quarter 2013 earnings as of April 19, a mere 45% of these have beaten revenue estimates, according to FactSet. The 45% figure is well below the 64% that beat in the fourth-quarter earnings season and the 52% average of the prior four quarters. (Source: “Earnings Insight,” FactSet, April 19, 2013.)
The lack of revenue growth in the first-quarter … Read More
No Time to Relax, More Significant Correction May Be in the Works
By George Leong, B.Comm. for Profit Confidential
The stock market came off its worst week this year; but even given the minor correction, I don’t think we can relax enough to re-enter the market and buy, based on my stock analysis.
I think there could be a more significant market correction down the road that could shave another five percent off the current levels.
Yet even so, the selling over the recent sessions have driven the key stock indices down to levels that are more realistic compared to levels at the end of the first quarter, according to my stock analysis.
Simply put, the previous rate of the advance was not sustainable.
My stock analysis shows that with April coming to an end, we could also be seeing the final leg of the current six-month bull cycle from November to April that has historically resulted in the best gains, according to the Stock Trader’s Almanac.
This doesn’t mean that stocks are not worth a look for the next six months. But if the historical cycles pan out, the best gains may have already been made, so it will come down to stock selection, according to my stock analysis.
Let’s take a look at the investment climate at this juncture.
What’s critical right now is the first-quarter earnings season. So far, with about 104 S&P 500 companies having reported, the results have more or less been in line with the previous quarters, with about 67.3% beating earnings-per-share (EPS) estimates, according to Thomson Financial.
Another 170 S&P 500 companies are reporting this week.
Of the 20% of the S&P 500 companies that have reported, the results … Read More
Next Tiny Country in the Eurozone to Bust
By Michael Lombardi, MBA for Profit Confidential
While cutting the growth outlook of the global economy, Chief Economist of the International Monetary Fund (IMF) Olivier Blanchard said yesterday, “…the main challenge is very much in Europe.” (Source: “IMF Cuts Global Growth Outlook as Europe Demand Urged,” Bloomberg, April 16, 2013.)
Blanchard showed further concerns regarding the economic slowdown in the eurozone, saying, “Europe should do everything it can to strengthen private demand. What this means is aggressive monetary policy and what this means is getting the financial system stronger…” (Source: Ibid.) In other words, print more paper money.
Greece, Spain, Italy, and Portugal are facing a staggering economic slowdown and are dragging the stronger eurozone nations down with them. The countries that were supposedly “immune” to the debt crisis in the region are now feeling the pressures.
Germany, the strongest nation in the eurozone and the fourth-largest economy in the world, is having troubles; demand is falling. German car sales plummeted 13% in the first quarter of 2013. (Source: Financial Times, April 17, 2013.) The Bundesbank, Germany’s central bank, expects the country’s gross domestic product (GDP) to increase by only 0.5% in 2013. (Source: MNI News, April 16, 2013.) But being so early in the year, this 0.5% GDP growth can easily turn into a 0.5% contraction, considering the problems in the eurozone.
As I have been writing since the beginning of 2012, the economic slowdown in the eurozone will spread to other parts of the world, rather than it being contained.
The events in Cyprus sent a significant amount of fear into the global economy. And the crisis there still isn’t over. … Read More
What Will It Take for Silver to Snap out of Its Coma?
By George Leong, B.Comm. for Profit Confidential
Silver is in a coma at this time, stuck below $30.00 and both its 50- and 200-day moving averages (MAs). Yet for traders, prices can easily spike on any firm sign of a sustained global economic recovery, since the white metal is used in numerous industrial applications, including in the pharmaceutical, technology, jewelry, and industrial areas. Traders can also watch for buying from India and China. (Read “China: This is Your Time!”)
With signs of a sustained economic renewal in the United States, don’t be surprised to see the demand for silver ratchet higher. The uncertainty is the timing of the move.
Yet with silver currently doing very little, sitting below $30.00, it may be time to begin looking at the white metal as a possible upcoming trade back above $30.00.
Silver has been declining, caught in a sideways trading channel since September 2011, based on my technical analysis. Over the past year, the metal has made a new high only nine times, but in that same timeframe, it managed to make 15 new lows. Shortening the time to six months shows an even worse scenario, with 19 new lows and only two new highs.
As you can see in the chart below, spot silver has absolutely no support at this time; but this will be tested, as it heads toward a key support line, as indicated by the lower horizontal blue line in the chart.
As it has appeared numerous times in the past few years, silver looks set for a bounce back up past $30.00 to the $35.00 level, as it did in 2011 and … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"
