At the same time, easing of the GDP growth rate from more than 5% to the current 1% or so is taking a greater toll on corporate results than would have been imagined. The vast majority of updated forecasts of revenues and profits continue to be downgrades, with sights often lowered dramatically.
Standard & Poor's analysts are now estimating a gain of only 3% in operating earnings of the S&P 500 for 2001. And it wouldn't take many more disappointments to push our projection of profits for the "500" into negative territory for the year.
The market showed resistance to bad news in the latter part of last week, but it's too early to read anything into that. When the widely watched Nasdaq Composite index recently fell below its early-January low, it was important, according to S&P technical analyst Mark Arbeter, for it to mount a rally quickly and push above the previous bottom of roughly 2290. That hasn't happened so far.
Nevertheless, selling now is probably a bad long-term move. Often, getting back in is put off until stocks are well above the lows. Many issues currently offer good value, and investors should soon start looking across the valley to the improved operating prospects for 2002.
Standard & Poor's now expects the S&P 500 to end 2001 at 1350 (S&P had previously forecast 1500) and sees Nasdaq finishing at 2600 (vs. 3300). But the reduced projections still represent decent gains of 9% and 23%, respectively, from current levels.
The Outlook is Standard & Poor's weekly investment advisory newsletter. Subscribe now to a 24-issue, 6 month trial of The Outlook for only $57 (annual subscription price: $298) by calling 1-800-852-1641. Kaufman is editor of Standard & Poor's weekly investing newsletter, The Outlook