Great news on the economy and from companies this week supports the market highs, but fails to propel them higher. The big picture is getting considerably brighter. It is increasingly evident that the economy is gaining momentum propelled by a broadening array of industries.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair.” Charles Dickens’ Introduction to A Tale of Two Cities – 1859, comparingLondon andParis at the time of the French Revolution (1789-1799)
This week we mourn the deaths of seven national and international heroes while celebrating their high achievements with those of the space program. We laud the program’s proud history of excellence during the cold war competition later adapting to the new world order to become a model of international cooperation.
Over the past several days, companies have released their calendar first quarter earnings and given their best guesses about near-term prospects. The actual earnings reports have been in rather stark contrast to the more downbeat management projections for business in the coming quarters. Earnings reports seem to support the economic recovery, but they are somewhat below earlier expectations. Thomson Financial/First Call estimates that profits for the S&P 500 companies probably dropped 10.7% in the first three months of 2002, more than the 8.2% drop forecast by analysts at the beginning of March. On the flip side though, 59% of companies reporting to date have beaten earnings projections, a higher percentage than at any time since 1994: a period when the Fed actively promoted expansion as they do now.