Wall Street may be bracing for a pullback as U.S. earnings season begins this week - if the clouds of profit warnings from bellwethers ranging from FedEx to Hewlett-Packard lead to a downpour of lower profits - or even losses.
Thanks to aggressive stimulus plans from central banks around the world, the Standard & Poor's 500 index gained 5.8 percent over the third quarter. That sharp rally occurred even as companies were struggling. Earnings for that period are forecast to fall 2.4 percent from the year-ago quarter. If that happens, this would be the first earnings decline in three years, according to Thomson Reuters data.
In all, the negative-to-positive ratio for earnings forecasts is 4.3 to 1, the most negative since the third quarter of 2001, he said.
Tech and materials were also among sectors with the most negative outlooks for the quarter, with tech's negative-to-positive guidance at 5.4 to 1 and materials at 7 to 1. (commentary & photo courtesy of Reuters)
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RSI has some interesting foreign flavored picks this week. They are:
- iShares MSCI Germany Index (EWG)
- iShares MSCI EMU Index (EZU)
- WisdomTree India Earnings (EPI)
Two country specific funds and one European Union fund.
EWG has had a great run since early summer. This run has beaten the overall market and it has backed off in recent weeks. Money flow has been strong. It pays a yield of 2.58%. If you don’t mind the risks of a single country fund, I would suggest buying after its current correction has run its course.
EZU has the same characteristics as EWG, except it may be at the completion of its correction and it pays a higher yield of 3.65%. Same comment applies to buying after its current correction has run its course.
And finally there is India earnings fund, EPI. It appears to be breaking out of a very long downtrend that goes back to November of 2010. Money flow looks strong and this might propel it higher. Again if you can stomach a single country stock, it just might be a winner.
I hope you enjoyed your weekend. Saturday was Apple Days in Penrose. An unseasonable chilly day for an outdoor festival, but we enjoyed it. Catch you next weekend.
