Back to top

Ahead of Wall Street

Sheraz Mian

Ahead of Wall Street - September 26, 2012

INTC FDX

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Wednesday, September 26, 2012

Optimists will likely call the market's recent behavior a consolidation phase, but the reality is that the market appears to be having second thoughts about the QE3 inspired gains. The gains started in the summer and pushed stocks to their highest level after the announcement.

The market pause of the last few trading sessions may just be a sign of tentativeness and nervousness ahead of next week’s key economic data and the start of the third quarter reporting season. But the tentativeness is completely justified. The return today of Spain and Euro-zone centric concerns will add to the nervousness.

I have been skeptical of the sustainability of Fed inspired gains for a while and continue to believe that Bernanke’s open-ended bond purchase program is largely irrelevant to the broader issues facing the U.S. economy. Lack of economic growth, both in the U.S. as well as worldwide, is steadily emerging as a far bigger drag on corporate profitability than many in the market realize at this stage. We have seen this show up in earnings projections for the third quarter, which are expected to be down 3.4% from the same period last year.

But expectations still remain high for the fourth quarter and beyond in the hope that the economic growth issues in the U.S. and China will prove to be temporary. It is useful to be somewhat skeptical of that view at this stage and view the recent profit warnings from companies like FedEx (FDX - Analyst Report), Intel (INTC - Analyst Report), and Norfolk Southern as a sign of things to come.

My sense is that the third quarter reporting season will provide this market a reality check, helping bring down earnings and overall growth expectations for the out quarters. This may not trigger precipitous market sell-off, but it will most likely cause the market to give back some, if not all, of its recent gains.

Sheraz Mian
Director of Research

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ANI PHARMACE ANIP 29.97 +17.30%
ATLAS FINANC AFH 14.57 +2.32%
FEDERATED NA FNHC 20.25 +1.91%
GREEN PLAINS GPRE 29.43 +1.66%
PIONEER ENER PES 14.06 +1.30%