First Quarter Earnings – Lookout, Companies Are Beating!
So far, 275 companies have reported their earnings for the 1st quarter of 2012. At this point, just about 75% of them have beaten what the analysts expected them to earn. That may not sound impressive on the surface, but considering that the long-term average is about 66% AND everyone thought this was going to be a poor quarter for earnings, I think it is good news.
We had a nice week in the equity markets too, despite some poor economic news. That makes two winning weeks in a row for the Dow Jones Industrial Average (DJIA). For now, the market seems content with good earnings and poor economic data (ok, really it’s ‘less good’ data). That probably won’t last, but for now the market seems ok with it.
For the week, the DJIA gained 1.53% to 13228, the Standard & Poor’s (S&P) 500 gained 1.80% to 1403, and the Nasdaq Composite Index gained 2.29% to 3069. The Russell 2000 Index, which tracks the performance of small capitalization stocks, gained 2.66% to finish at 825.
As I wrote last week, after 27 consecutive weeks of stronger US economic data, we have seen three weeks of mixed data. No reason for panic, but the change is something we will keep an eye on. The biggest disappointment is that the 4 week moving average for unemployment claims increased again last week. The gross domestic product (GDP) report, while poor, did not seem to weigh the market down as much as I thought it would. Again, I think earnings are helping offset the weak economic data.
However, mixed data implies that there is some good data too – and there has continued to be better news in housing. In fact, there was a huge surge in the homebuilding sector last week, up over 10%. Improved housing has a lot of effects, including improving consumer net worth, employment and consumer confidence.
All good stuff – we recommend investors continue to stay fully invested and maintain an allocation to the cyclical sectors as well as the small and mid-cap growth sectors. Please call us with questions or concerns.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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