On the surface, the corporate earnings growth rate of these companies certainly looks good. But the devil resides in the details!<\/p>\n
While a significant number of the S&P 500 companies were able to beat the already-lowered earnings estimates in the second quarter, only 53% of these companies reported revenues above mean estimates. Not impressive.<\/p>\n
The financial sector of the S&P 500 reported earnings growth of 28.1% in the second quarter\u2014this was, hands down, the biggest contributor to \u201crobust\u201d growth in corporate earnings<\/a> we saw in the second quarter.<\/p>\n The other nine sectors of the index didn\u2019t do as well. Sectors like the consumer discretionary, utilities, consumer staples, health care, and industrial sectors showed corporate earnings growth of less than five percent. The telecom services, information technology, energy, and material sectors had negative earnings growth.<\/p>\n In other words: take the financial sector out from the S&P 500 and corporate earnings for the second quarter border negative growth.<\/p>\n Going forward, it\u2019s a rough road. For the third quarter, 103 S&P 500 companies have provided an earnings outlook. Of these companies, 85 of them have issued a negative outlook, while only 18 have provided positive guidance. The number of S&P 500 companies that are pessimistic about their corporate earnings in the current quarter makes up more than 82% of those that have issued their earnings guidance!<\/p>\n All of this shouldn\u2019t come as a surprise to readers of Profit Confidential<\/i>; in these pages, I have been talking about slowing corporate earnings and revenues since the beginning of this year. For the second quarter, companies in the S&P 500 only beat already-lowered expectations!<\/p>\n Now that we are hearing that the Federal Reserve may pull back on all that paper money printing it\u2019s been busy with, the stock market is going down. The chart below clearly shows the index is falling apart. Don\u2019t expect corporate earnings to save it!<\/p>\n Chart courtesy of www.StockCharts.com<\/i><\/p>\n \u00a0What He Said:<\/b><\/p>\n \u201cThe Dow Jones Industrial Average<\/a>, the S&P 500 and the other major stock market indices finished yesterday with the best two-day showing since 2002. I\u2019m looking at the market rally of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for America.\u201d Michael Lombardi in Profit Confidential<\/i>, November 29, 2007. The Dow Jones Industrial Average peaked at 14,279 in October 2007. A \u201csuckers\u201d rally developed in November 2007, which Michael quickly classified as<\/p>\n![\"SPX-S&P-500-Large-Cap-Index\"](\"http:\/\/www.profitconfidential.com\/wp-content\/uploads\/2013\/08\/SPX-SP-500-Large-Cap-Index.jpg\")
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