Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Markets Failing to Give Another AI Mega-trend Buying Opportunity - 6th Jun 20
Is the Stock Bulls' Cup Half-Full or Half-Empty? - 6th Jun 20
Is America Headed for a Post-Apocalyptic Currency Collapse? - 6th Jun 20
Potential Highs and Lows For Gold In 2020 - 5th Jun 20
Tying Gold Miners and USD Signals for What Comes Next - 5th Jun 20
Rigged Markets - Central Bank Hypnosis - 5th Jun 20
Gold’s role in the Greater Depression of 2020 - 5th Jun 20
UK Coronavirus Catastrophe Trend Analysis Video - 5th Jun 20
Why Land Rover Discovery Sport SAT NAV is Crap, Use Google Maps Instead - 5th Jun 20
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Why I’m Still Skeptical on Key Stock Stock Market Indices

Stock-Markets / Stock Markets 2013 Nov 14, 2013 - 12:31 PM GMT

By: DailyGainsLetter

Stock-Markets

Mohammad Zulfiqar writes: The companies on key stock indices are showing very troubling trends, which can cause them to slide lower and generate losses in investors’ portfolios. Don’t just look at the number on the surface.

As of November 8, 446 companies on the S&P 500 have reported their corporate earnings and 73% of them were able to show earnings above estimates. The corporate earnings growth rate was 3.4%. (Source: “Earnings Insight,” FactSet web site, November 8, 2013.)


These numbers certainly sound surprising on the surface, but just looking a little deeper into the details shows that they’re the only good thing about them. As mentioned earlier, 73% of them beat the corporate earnings estimates; sadly, only 52% of them were able to beat their estimated revenue.

This means that the companies aren’t selling as much; rather, their corporate earnings are coming from somewhere else. One place it could be is from cost-cutting; an example of this could be General Electric Company (NYSE/GE), one of the conglomerates on the key stock indices.

The company’s revenue fell 1.5% in the third quarter to $35.73 billion. The company also said that it has cut costs by $1.0 billion; the original goal was to make these cuts in one year, but it was able to do it in nine months. The CEO of the company expects more cuts coming until the end of the year. (Source: Linebaugh, K., “General Electric Slashes Costs,” The Wall Street Journal, October 18, 2013.)

Currently, the key stock indices are soaring higher each day, and they continue to break new records. Just look at the chart below of the S&P 500, which seems to show that nothing is wrong and the trend is strong.


Chart courtesy of www.StockCharts.com

When I look at all this, I feel slightly skeptical. Companies on key stock indices are showing great corporate earnings and missing on revenues, which tells me that their profits aren’t really coming from their core business, but from elsewhere. This should be a sign of great concern.

In the short run, key stock indices look to have momentum to the upside and we are seeing too much optimism. Things may continue to go that way, but based on poor fundamentals, they can turn very quickly as well.

Those who are investing for the long term should look into taking some profits off the table. They should also be very cautious in what they buy, because some sectors have seen robust growth, but their fundamentals are deteriorating faster than others.

This article Why I’m Still Skeptical on Key Stock Indices was originally published at Daily Gains Letter

© 2013 Copyright Daily Gains Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules