Sam Stovall's Sector Watch February 26, 2008, 7:44PM EST

Earnings: A Clearer Picture Emerges

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Despite a dismal earnings story in 2007, S&P equity analysts are expecting results for the 1500 to recover in the second half of 2008, and post a 17.8% full-year increase as a result of easier comparisons, the expected benefit from a year's worth of Fed rate cuts (we think the benchmark Fed funds rate target will bottom at 2.5% by the second quarter), as well as a continuation of share buybacks from companies that still have a lot of cash on their books.

Industry Momentum List Update

For regular readers of the Sector Watch column, here is this week's list of the industries in the S&P 1500 with Relative Strength Rankings of “5” (price performances in the past 12 months that were among the top 10% of the industries in the S&P 1500), along with a stock that has the highest S&P STARS (tie goes to the issue with the largest market value).

Subindustry	Company	Ticker	S&P STARS Rank	Price (2/22/08)
Agricultural Products	Archer-Daniels-Midland	ADM	3	$45
Coal & Consumable Fuels	Peabody Energy	BTU	3	$58
Construction & Engineering	Fluor	FLR	4	$132
Diversified Metals & Mining	Freeport-McMoRan Copper	FCX	4	$99
Fertilizers & Agr. Chem.	Monsanto	MON	3	$117
Health Care Services	LabCorp	LH	5	$79
Industrial Gases	Air Products	APD	3	$93
Integrated Oil & Gas	Exxon Mobil	XOM	5	$87
Internet Retail	Amazon.com	AMZN	3	$72
Life Sciences Tools	Thermo Fisher	TMO	5	$56
Oil & Gas Drilling	Noble Corp.	NE	5	$49
Oil & Gas Equip. & Svcs.	Baker Hughes	BHI	5	$69
Oil & Gas E&P	Swift Energy	SFY	5	$48
Soft Drinks	Coca-Cola Co.	KO	5	$58

Stovall is chief investment strategist for Standard & Poor's Equity Research Services .

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