Tuesday, July 21, 2009

market barometer

What an interesting time to be following the stock market, economic and business news, as well as corporate earnings this earnings season. This is my take on what is occurring broken down into smiles and frowns.

Smiles
  • Recent results from companies like Caterpillar (CAT), CN Rail (CNI/CNR), and others showed positive signals of stabilization of the economy as well as a pick up in emerging economies.
  • Many companies are really blowing away analyst earnings estimates including industrials and technology firms. Forward earnings guidance is also being raised.
  • The S&P 500 index is up 42% from its March lows
  • New economic estimates are indicating growth is right around the corner and the recession has ended.

Frowns

  • Funny thing is that earnings coming in 'not as bad' is almost always attributed to cost cutting, which can't go on forever.
  • Earnings are beating estimates, but have you noticed how low estimates are? For example Caterpillar's second quarter profit was down a whopping 66% from last year.
  • Unemployment continues to ramp up in the US and Canada and some estimates are indicating that jobless rate could top 10% soon.
  • The market is getting sick of 'not as bad' and 'stabilization' and is now searching for more in the form of growth, which may or may not come as quickly as Mr.Market wants.

Interesting stock moves lately:

  • Caterpillar (CAT) up 24% in the last five days
  • IBM (IBM) up 12% in the last five days
  • CSX Corporation (CSX) up 11% in the last five days

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