Wednesday, April 23, 2014
By Paul Wiseman And Joshua Freed
The Associated Press
(Continued from page 2)
Specialist Vincent Surace works on the floor of the New York Stock Exchange on Friday.
The Associated Press
In the U.S., the outlook for corporate profits has already been weakening, and the turmoil in emerging-market currencies could make matters worse.
About two-thirds of the 123 S&P 500 companies that have reported fourth-quarter earnings so far have beaten analysts' estimates, according to S&P Capital IQ, in line with the historical average. But the forecasts for income growth have been falling and could decline further.
As recently as this summer, analysts predicted earnings growth of more than 11 percent for the fourth quarter, but now they expect just half that — 5.9 percent.
Some companies are becoming more pessimistic, too. For the January-March quarter, seven out of every 10 that have talked about their prospects have cut projections, more than average, according to FactSet. The stocks have tanked as a result. Since United Continental lowered revenue estimates on Thursday, for instance, its stock has fallen 6 percent.
U.S.-based multinational companies posted some of the biggest declines on Friday as investors worried about overseas sales. Oracle and 3M have warned that their results could take a hit because of the strengthening dollar. Shares of the companies fell 3 percent.
Companies that rely on overseas sales will bring home fewer dollars if the dollar continues to appreciate against foreign currencies, especially in emerging markets that have been hammered this week. In Argentina, for example, the same amount of pesos buys fewer dollars today than it did last week.
On Tuesday, Europe-based consumer goods giant Unilever said fourth-quarter sales slowed because of weakness in emerging markets. The decline was mostly because of unfavorable currency moves.
"So when emerging markets sniffle," said Lawrence Creatura, a portfolio manager with Federated Investors, "large-cap companies can catch a cold."