Earnings Data: No Recession Soon
by Dirk Van Dijk
Aug 07, 2006
The summer earnings season is wrapping up and the S&P 500Â’s growth numbers have been a pleasant surprise. Of the 413 (82.5%) companies within the large-cap index that have reported, the median second quarter EPS growth is 13.1%. The median surprise is an impressive 3.9% and positive surprises have outnumbered negatives by over 4:1.
With so many positive surprises flooding reports this season, a market rally wouldnÂ’t have been out of the question. But thatÂ’s not whatÂ’s happened. In fact, the S&P 500 is actually down almost 3% over the last three months.
So what gives? Well it seems to be a combination of factors. The The Israeli/Lebanon conflict, volatile energy prices, and choppy jobs and retail sales reports, weaker than expected GDP growth and higher than expected inflation numbers have investors biting their nails and holding their cash. In short as the “E” has been moving up, the P/E has been moving down, leaving the “P” basically unchanged (although very volatile from day to day).
So what is happening in the market is new leadership is emerging. The sectors which have done well in the past like oil and commodities have not seen any up move in this phase infact some of the stocks in these sectors are heading down. New set of companies have emerged in retail and technology sector to lead higher. Retail seems to be having some nice breakouts currently.
I continue to find some good opportunities like INPH, PWEI, DK, NUHC,AETH, STEC, etc. I am also eyeing some techs like RIMM and retail like AEOS, ANF, BEBE, MWRK etc. If you look below the surface some good opportunities are setting up on both long and short side. It is a stock pickers market.
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