Inflation Is Not the Big Worry - Analyst Blog
17 8월 2011 - 6:16PM
Zacks
Stocks will likely drift today given the relatively thin economic
calendar. To be fair, we do have the July wholesale inflation
reading this morning, which was a bit on the hotter side. But
pricing pressures are not on top of the market's worries at this
stage.
The pullback in commodity prices in recent days has made last
month's inflation readings, whether in this morning's PPI or
tomorrow's CPI, relatively dated. The market will be able to see
through the transient nature of the pressures in them.
The most important issue for the market is the uncertain U.S.
growth outlook. And we will likely need to wait another few weeks
before we get a good handle on the economy's near-term growth
momentum. But one thing is getting clearer with the economic
releases of the last few days -- that the U.S. economy is not
heading towards a recession. While growth may be sub-par and below
the economy's long-run potential, it is nevertheless in the
positive column.
And the economy's ability to dodge the recession bullet is a big
deal for stocks. Companies know how to profitably operate in a
low-growth environment; we got ample proof of that in the first
half of the year when corporate earnings growth remained impressive
even as the U.S. economy eked out an under-1% growth.
Notwithstanding the recession fears, the economy appears on track
to grow at a pace in the back half that is double the first half's
rate. That kind of growth may not do much to bring down the
unemployment rate, but that is plenty to sustain the earnings
growth momentum going forward. And if earnings expectations for the
coming quarters avoid negative revisions, then stocks likely have
decent upside from current levels. The relative stability in stock
prices over the last few sessions is a reflection of this
realization.
We are not hearing anything negative from management teams on the
near-term operating environment, at least from the companies still
coming out with results. We had
Target (TGT) this
morning ahead of EPS and revenue expectations, and guided higher.
We also got a solid earnings and revenue beat from
Ambercrombie & Fitch (ANF).
Staples (SPLS), the largest office-supply chain in
the U.S., also came ahead of bottom- and top-line estimates and
raised guidance.
These positive retail earnings reports run counter to what we heard
from
Dell (DELL) after the close on Tuesday. The
computer maker came ahead of earnings expectations, but missed on
revenue and provided a weak outlook. Weakness on the consumer side
offset continued momentum on the enterprise side.
Limited
Brands (LTD) reports after the close today.
It is nice to see the market move in under-100 point increments
following the 400-plus points daily moves of the last two weeks.
With the economic picture steadily stabilizing, the near-term
outlook for stocks is improving.
ABERCROMBIE (ANF): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
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