Dow 10,000: Buy it, Or Sell it?
by Robert Williams, Publisher
Monday, October 19, 2009
Analysts expect earnings for S&P 500 companies to decline by nearly 25% from a year ago. When viewed through such a lens, the financial crisis and subsequent recession erased a quarter’s worth of profits from America’s best companies.
So how is it that the Dow Jones Industrial Average – which just poked its nose above the 10,000 level – can race higher nearly everyday? (The Dow has posted gains in roughly two-thirds of the trading days since July.)
Because we gauge companies based on their performance versus analysts’ estimates. And not by their performance relative to prior (actual) results.
It’s kind of counterintuitive, I know. But the stock market is the preeminent
forward-looking entity.
So if you want to know what’s really powering the Dow, it’s likely the fact that analysts now project S&P 500 companies to earn $75.61 a share, representing a 25% bump to their original estimates of $59.95 made just weeks ago.
Renowned economist Mark Skousen believes that Dow 10,000 could be a weigh station to 11,000 by the end of the year. And the longer-term outlook is even more bullish, to say the least.
Read Mark’s article on the Dow cracking 10,000 to see just how high he thinks it can go…
Ahead of the tape,
Robert Williams
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In addition to once being a full-time trader of equities and equity derivatives, Robert Williams has served as the lead financial analyst for a Forbes top-50 private corporation and an analyst for the endowment of a major academic institution. He's also been profiled in such books as Trade with Passion and Purpose and Alexander Green's The Secret of Shelter Island. 
MediaCurves.com conducted a study among 385 viewers of a news clip featuring the Dow Jones Industrial topping 10,000. Results showed that more than half of viewers (57%) reported that the national economy is improving. Despite reports of the improved economic conditions, the majority of viewers (68%) who indicated that the economy was improving also stated that they do not plan to increase their spending. In addition, 42% of the viewers reported that they are currently searching for a job.
More in depth results can be seen at:
http://www.mediacurves.com/Culture/J7600-USEconomy/Index.cfm
Thanks,
Ben
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