What a Week: Running to Stand
Still
Chief among the
immediate concerns is not only whether expectations about fourth-quarter
earnings will be met but mostly what outlook companies will provide about the
coming quarters.
According to the Thomson First Call consensus of analysts
estimates, S&P 500 earnings are expected to have increased 13.4% from the
year-ago quarter, and are seen rising 13% in 2006. That roughly matches the
13% growth seen in 2005, which seems somewhat out of whack as economists
predict the economy will slow this year.
"Fourth-quarter earnings should be OK, and I think
most companies will meet or exceed expectations," Ablin says. "But
my concern is that they will also guide lower for the coming quarters so that
it will be a mixed blessing."
Investors were reminded about the forces already exerting
pressure on the economy and profits during the week, as Alcoa (AA:NYSE -
commentary - research - Cramer's Take), DuPont (DD:NYSE - commentary -
research - Cramer's Take), Phelps Dodge (PD:NYSE - commentary - research -
Cramer's Take) and Tyco (TYC:NYSE - commentary - research - Cramer's Take)
issued profit warnings.
All three cyclical companies face rising input costs,
namely energy, and have had little success passing on those costs to their
customers. All three have some degree of exposure to the distraught auto
industry, which has been avidly seeking cost cuts.
General Motors (GM:NYSE - commentary - research - Cramer's
Take) CEO Rick Wagoner made new promises in that direction on Friday. That did
little for its shares, which slipped 2% this week on concerns that investor
Kirk Kerkorian may pressure GM to cut its dividend.
But similar deflationary trends have helped keep core
producer prices down in December. While higher energy prices boosted the
headline PPI by 0.9%, the core index rose only 0.1%. That's good news for
those hoping the Federal Reserve will soon end its 18-month-long
rate-tightening campaign.
Heavy discounts in December led to higher auto sales, themselves
lifting overall retail sales for that month by a less-than-expected 0.7%.
Trust.
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