Saturday, October 18, 2003

Profits push indexes to new highs


Closing Bell

By Hope Yen
The Associated Press

NEW YORK - Wall Street welcomed another batch of better-than-expected profits this past week, helping carry the major indexes to 52-week highs. While analysts expect moderate gains ahead, the third-quarter earnings season might represent a peak.

With nearly one-third of the Standard & Poor's 500 companies reporting so far, 90 percent have met or beaten analysts' estimates, according to Thomson First Call. S&P 500 earnings are expected to rise nearly 20 percent from last year; that figure is up from the initial estimate of 15.7 percent just two weeks ago.

"The economic recovery has arrived and turned out to be much healthier and stronger than advertised," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "But 2004 won't be as rosy as 2003."

He said that some of the unexpectedly strong earnings could be attributed to the dollar's depreciation as well as this year's tax cuts. But those effects could be more tempered in coming quarters, while the risk of rising interest rates continues to grow.

"It's possible the market's expectations have run ahead of economic fundamentals," Sohn said.

The three main gauges posted new highs this past week, with the Nasdaq composite notching its best performance in 21 months and the Dow Jones industrials and S&P 500 reaching levels not seen in nearly 17 months.

Most of the gains came early in the week on better-than-expected results from Motorola Corp. on Monday and Johnson & Johnson on Tuesday. Then the markets lurched up and down the remainder of the week, leaving the main gauges mixed for the week.




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