Tough time for Wall St

Stocks may strain to hold 9-month highs

If upcoming earnings from US retailers are as unimpressive as the rest of the profit season has been, Wall Street could face a tough time justifying a stock market at nine-month highs.

NEW YORK: If upcoming earnings from US retailers are as unimpressive as the rest of the profit season has been, Wall Street could face a tough time justifying a stock market at ninemonth highs.

Even with a Greece deal now in the works and the US economic recovery showing stronger momentum, strategists think the market could face resistance in a push higher.

Less than two months into the year, the benchmark Standard & Poor’s (S&P) index is up more than 8% and has already exceeded many analysts’ forecasts for the year.

The problem is the market has not seen as much upbeat news out of this earnings season as it has in recent ones.

“Earnings have generally come in more disappointing than they have been,” said Robbert Van Batenburg, head of equity research at Louis Capital in New York. “I don’t think there’s a lot of fireworks coming” from this week’s financial results.

The index ended Friday at 1,361 points, its highest since May 2011. That was above a Reuters poll forecast in December that the index would end 2012 at 1,340.

A break above 1,370 would put the S&P 500 at its highest since June 2008, before the September 2008 collapse of Lehman Brothers.

The Dow industrial average is fast approaching the key psychological level of 13,000, while the Nasdaq has been trading at its highest since 2000 and is near the 3,000 level.

S&P 500 earnings performance has so far trailed recent quarters in terms of beating Wall Street’s estimates. The percentage of companies beating analyst profit expectations is at 64%, according to Thomson Reuters data.

Earnings have generally come in more disappointing than they have been. I don’t think there’s a lot of fireworks coming from this week’s financial results. —

ROBBERT VAN BATENBURG

HEAD OF EQUITY RESEARCH, LOUIS CAPITAL

While that percentage has improved since the start of the earnings season, it’s below the average beat rate for the past four quarters of 70%, the Thomson Reuters data showed.

This week brings results from top retailers, including Walmart and Home Depot. Companies in the consumer discretionaries group so far have a beat rate of 70%, above the average for the S&P, but many retailers in the group have yet to report.

The week is seen as one of the last big ones of the earnings period. With results in already from 404 S&P 500 companies, investor focus already may have shifted away from earnings.

That leaves a lot of focus on the outlook for Europe and the US economy. Data on existing and new-home sales is expected this week.

News of a deal for Greece, expected to help the country avoid a messy default, has helped drive stocks higher last week as has stronger data on the US economy.

Eurozone finance ministers are expected to meet today about the financial rescue for Greece. US markets will be closed for the Presidents Day holiday. — Reuters