With the Standard and Poor’s (S&P) 500 reaching all-time highs last seen in 2007, the Lancer Student Investment Fund (LSIF) is looking to 2013’s first round of earnings for justification, which began this Monday.
“With the market returning 10 percent year-to-date, there will need to be earnings growth for these current levels to be sustained,” said Kyle Profilet, co-manager of the LSIF. As economic growth forecasts came in light at the beginning of the calendar year, investors are already pessimistic toward top-line growth results in the first quarter.
In 2012, investors put aside earnings results, as increasing revenues fueled market gains. This theme could change, as earnings will possibly be a savior in a first quarter that was undermined by less optimistic economic growth.
“With payroll tax hikes coming into play this past quarter, it could be expected that we could see a reduction in consumer spending,” added Aaron Taylor, HealthCare sector manager and economics major. “This paradigm will be exposed on Thursday, when same- store-sales data is released followed by the release of the Commerce Department’s Retail Sales on Friday.”
The possibility of a slowdown in consumer spending could create issues for companies who rely on consumers’ discretionary dollars.
Alcoa was the first to release their earnings on Monday, showing weaker than expected revenues, while improving their overall profits. This confirms the predictions made going into this round of earnings.
“Another earnings release to take note of will be Wells Fargo on Friday. Their performance this past quarter will be a great indication of how the housing recovery faired,” stated Dan Hughes, financial sector manager. Housing-related stocks have done extremely well over the past year, most notably KB Homes (KBH). This particular stock, which is owned in the LSIF portfolio, has seen gains nearing 50 percent just in the last six-months. With the kick-off of first-quarter earnings season underway and the release of several important economic indicators expected, this will make for an interesting rest of the week and next week.
