Mining profits are down 60% squeezed by lower commodity prices and higher costs. Other major sector profits like Technology were down 8%, Energy down 9% and Materials down 10%.
2nd Quarter sales were up 1.6% with 55% of companies exceeding reduced expectations.
Next Quarter's sales are anticipated to be up 3% with earnings up 4% lower forecasts than 3 months ago.
At 1688.98 the S& P sells at 15.4 times 2013 earnings estimates and 14.3 times 2014’s expected number.
While P/E ratios have been rising for the past few years interest rates seem to have reached their low point for this cycle. This suggests better earnings growth is needed to propel share prices higher. The market's rise has exceeded its earnings rise particularly since late 2012.
Europe seems to be moving out of recession but a key German election looms in September and recovery in the Southern tier will be a long process.
China and Japan are both undergoing transitions in their policies affecting the economy of each country and Asia in particular. The jury is out on the results as big structural adjustments are required to be implemented which take time and determination. The under performing Emerging markets as well as commodity driven developed countries are mainly affected.
In the U.S. very soon we face intractable budget issues and the full roll out of Obamacare both problematical. The ongoing uncertainty keeps business spending and new hiring in check. As consumer spending slows as it has this past month so too may the economy.
It will be an interesting period ahead setting the course for a stronger recovery or a stall as the Fed begins to unwind its QE program.
With the turn in the calendar year we will see a change in Fed leadership as well. I anticipate increased market volatility as 2013 enters the final 4 months.
Doug Coppola
August 12, 2013
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