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April 25, 2011 at 10:14 AM
The markets were down slightly on Monday on news that two companies — Advanced Micro Devices and Johnson Controls – released Q1 earnings that beat estimates but also shared their less-than-rosy outlook on 2011.
Also on Monday, one investment analyst said that the markets’ leading indicators are showing the first signs of an “inflection point,” but this situation could be “temporary.”
Corporate earnings appear stronger than last quarter, says Jason D. Pride (left), CFA, director of investment strategy for the Philadelphia-based investment-management firm Glenmede, which has about $20 billion in assets under management.
“Even if the rate of growth is decelerating, the economy is still expanding,” Pride notes.
More than 75 % of S&P 500 companies have beaten three-month-ago expectations for EPS and revenues, up from below 75% last quarter. Plus, 56% and 59% of Russell 2000 companies have beaten three-month-ago expectations for EPS and revenues, respectively, vs. 54% and 58% for the same time period of the previous quarter.
Still, there are lots of earnings left to come: Only 148 of the S&P 500 and 212 of the Russell 2000 have reported earnings so far for the first quarter 2011, Pride points out.
Other Factors
The two major sources of recent market uncertainty – Japan and the “Arab Spring” – “seem to have calmed,” the analyst shares. Nonetheless, both regions “retain the ability to immediately spook markets if events take a turn for the worse,” he explains.
