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Prospects and the Numbers

October 4, 2010 – 5:29 pm

September marked the end of the quarter so all eyes will be turning to earnings in October, but first we are going
to see some market moving numbers about jobs. September nonfarm payrolls will be reported on Friday. The experts are calling for no growth in new jobs with the unemployment rate moving up .1% to 9.7%

The start of earnings season generally is marked by Alcoa which reports on Thursday. Of course the actual numbers reported, while important, are not the end of the story but rather the grist for further expectations. Stocks will meet, beat or fall short of their numbers but just as important is their outlook for future earnings. In fact I will argue that their outlook is more important than the actual reported numbers. The market will punish any short fall in earnings but that can be overcome with a strong outlook with huge backorders for future earnings. Fred Smith, the CEO of FedEx, was very bullish about his company’s prospects beginning next year with his company achieving double digit growth. That is bullish for all other industries as you need delivery of goods
rising to have a bullish forecast for FedEx.

Short term it will be about earnings this last quarter and prospects looking forward to next quarter, but long term it will important for the economy to continue to grow. As we saw in the summer when economic activity lowered the market began to weaken. It appears we are not moving into a double dip recession, but we are also not seeing much evidence of strength. A ‘muddle through’ with weak growth appears to be the prospect into at least the end of the year. That is not a bad thing for stock prices.

Good Trading,

Steve Peasley

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