S&P 500: -3.00 (-0.28%)
We are entering into the thick of third quarter earnings season, with stalwarts such as Johnson & Johnson (JNJ), Intel (INTC), General Electric (GE), J.P. Morgan (JPM) and Goldman Sachs (GS) reporting this week. It will be particularly interesting to see Citigroup and Bank of America’s earnings, as they were the most troubled of the banks.
If revenues come in above expectations, and the economic indicators (retail sales, jobless claims, NY and Philly manufacturing indexes, U of Michigan sentiment index) come in strong, stocks could stage a big rally. I expect more stocks will beat earnings estimates than will not.
In the limited number of companies that have reported so, we have seen two major themes. The first is corporate cost-cutting, which has allowed firms to boost margins. This is not sustainable – eventually firms will have to spend to expand – but it is helping results in this quarter.
The second major theme has bee the continued reawakening of international markets, notably China. The Chinese desire for raw materials and other goods is helping plumb up global demand. With other countries in the region showing stability or even growth, it’s possible to see the region as an engine for global growth, as the U.S. and Europe deal with continued economic woes.
Intel will be reporting any minute now. I posted earlier today about Johnson & Johnson’s quarterly result, and I examine what their results tell us about healthcare companies that report next week.
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Peter J. Lazaroff, Investment Analyst
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