26 JUL 23:00 AFX *INSTINET Q2 PRO FORMA EPS 3C VS BREAKEVEN
26 JUL 22:59 AFX *INSTINET Q2 SALES $280M VS $280.5M
26 JUL 22:58 AFX *INSTINET Q2 NET EARNS 3C VS NET LOSS 2C
Profit growth may yet lift U.S. stocks, analyst says 27.07.2004 00:49 Headlines
SAN FRANCISCO (AFX) -- With the second-quarter earnings season nearly half
over and Wall Street unimpressed with the results, few observers expect a summer
rally.
Even so, the U.S. stock market may be on the verge of a rally because most
issues aren't overvalued, according to Michael Thompson, head of research for
Thomson Financial.
Earnings among the companies in the S&P 500 Index have been growing for the
past three quarters, and they appear on pace to report similar results in the
current season, he said.
"It now appears almost certain that this quarter will represent the fourth
consecutive quarter of 20 percent growth or better for earnings among the S&P
500 companies, which has only occurred twice in the past 25 years," Thompson
said.
It's only a matter of time, he added, before such growth pushes up blue-chip
stock prices. The S&P 500 is about 100 points higher than vs. the same time last
year, but it stands at a six-month low of 1,084.07.
The current sluggishness of the index seems to belie the bullish earnings growth
seen among its component names. "Something is keeping the market in check, and I
don't think it's the (rise in) interest rates," Thompson said. "There's loads of
historical evidence on how you don't have to have a bad stock market when
interest rates go up."
He continued: "It makes me a little crazy to see corporate bonds doing so well
in this ascending-rate environment, while stocks languish. At some point, people
are going to see that it's time to go shopping because stocks, by many measures,
do not appear overvalued."
How soon this will happen remains to be seen. At the very least, however,
investors will have more evidence to consider with this week, as more than 140
companies within the S&P 500 are on tap to issue their quarterly results.
This story was supplied by CBSMarketWatch. For further information see
www.cbsmarketwatch.com.
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