Posted on: Saturday, January 22, 2005
Even profits can't shake market of its doldrums
By Michael J. Martinez
Associated Press
NEW YORK — General Electric Co. is one of those companies that Wall Street often looks to as a barometer of the overall market, and with good reason.
The Dow Jones industrial has its hands in everything, from movies and television to finance to heavy manufacturing — a microcosm of corporate America. When GM announced an 18 percent jump in earnings yesterday, beating profit forecasts and issuing a strong outlook for 2005, investors should have been thrilled.
Yet the Dow fell more than 78 points in what has become a typical performance in this fourth-quarter earnings season.
The earnings numbers are undeniably good: Of the 114 companies in the Standard & Poor's 500 index that reported as of yesterday, 75, or more than two-thirds, surpassed analysts' profit forecasts.
According to Thomson Financial, the blended growth rate for fourth-quarter earnings — combining actual earnings growth with estimates for companies that have not yet reported — is a healthy 16.5 percent, well above the 13 percent to 15 percent most market watchers expected.
Yet so far this year, the Dow is down 3.62 percent, the S&P 500 is off 3.63 percent, and the Nasdaq composite index has lost 6.49 percent.
Investors aren't overlooking earnings entirely, as individual stocks have risen when their results met with Wall Street's approval, but they have often failed to lift other stocks in their sectors.
What's going on? Depends on whom you ask.
"The overriding thing at the moment is the run-up in oil prices," said Joseph McAlinden, chief investment officer for Morgan Stanley Investment Management.
Olsen has a different take. "People are concerned that the Federal Reserve is going to tighten up and raise rates, and that'll really hurt future earnings growth," he said.
And Rafi Zaman, managing director of U.S. equities at Dupont Capital Management, said, "Investors are trying to figure out which companies will continue to expand (profit) margins going forward and which will contract. That's why there's all this uncertainty in the marketplace."
