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We’re heading into the heart of corporate earnings season — and the misses are piling up fast!
Take International Business Machines (IBM, Weiss Ratings: B-), or “Big Blue” if you prefer. The global computer hardware, software, and tech consulting giant reported third-quarter adjusted profit of $3.68 a share — down from $4.08 a year earlier and missing expectations. Sales fell 4 percent to $22.4 billion.
What’s more, IBM doesn’t think things will improve anytime soon. The firm slashed its 2014 free cash flow forecast to a range of $12 billion to $13 billion from the $16 billion projection it offered last quarter. It also abandoned a profit target for 2015, and warned that it will need to cut many more jobs than it already has because of its business challenges.
IBM isn’t the only marquee name to disappoint investors though. Wal-Mart Stores (WMT, Weiss Ratings: B) just cut its 2014 sales growth forecast to a range of 2 percent to 3 percent from as much as 5 percent. The world’s biggest retailer said investments in e-commerce and other programs would pressure profits as well.
|Wal-Mart’s supercenters suffered a 0.3 percent same-store sales decline in the second quarter compared with last year.|
I recently highlighted how some of the nation’s biggest banks couldn’t get the job done, either. Even some of the highest of the high-flyers are getting crushed this earnings season. Just look at Netflix (NFLX, Weiss Ratings: C+). The stock plunged more than $100 the other day after releasing disappointing subscriber figures and a lackluster profit outlook.
Can the earnings season still be saved? Sure. Some of the biggest names — think Apple (AAPL, Weiss Ratings: A-) or General Motors (GM, Weiss Ratings: C+) — are either giving their profit reports right now or poised to do so soon. If the news is good, it could help turn the tide.
|“Can the earnings season still be saved?”|
But I can’t help but wonder: Do we have to add deteriorating earnings trends to the long list of challenges facing stocks right now? And if so, does that mean Friday’s almost-300-point rally in the Dow was nothing more than an isolated flash in the pan, rather than a change in trend?
As always, I welcome your comments here. I’m especially interested in learning if you think the market has put in a short-term bottom … or if you think more panic selling lies ahead. If so, why?
|Our Readers Speak|
Multiple conversations are going strong over at the website, especially with regards to the ongoing Ebola crisis.
Reader Jeff weighed in on the government’s mistakes in combating the virus, saying: “From the people who brought you FEMA … do you expect anything less? The protocol should have been to send a CDC swat team to that hospital immediately when Duncan was admitted. Our lives and our economy are in the hands of arrogant, incompetent bureaucrats. Travel restrictions are needed not just to protect America from Ebola but from our own incompetence.”
Reader Dr. Jerome B. added: “As a retired physician who practiced during the days of common sense, I am appalled by the total lack of coordination and realistic approach to this Ebola outbreak. The whole approach has been political rather than pragmatic. I see this whole situation spiraling out of control and this administration only becoming more inept.”
In addition, Reader Ron said: “The CDC and WHO have the same problem as our U.S. government, too many layers of management that are sucking up the funds and worrying about themselves. This leaves ‘not enough’ left for the people that do the actual work of protecting us (taxpayers).
“A new ‘Czar’ is doing nothing more than adding one more layer of management, which will slow down any real responses even more. With Obama appointing so many Czars, is anyone other than me old enough to remember that Czars are communist dictators?”
Great insights all around — I am certainly not very encouraged by the early screw-ups, and I sincerely hope that the CDC and the rest of the feds get their act together soon!
Speaking of feds — or technically, the Fed — Reader Big M. took a shot at the misguided policy choices out of Bernanke, Yellen, and Co. He said: “The ‘Fed Wizards’ program works just fine for them and the 1 percent. They printed three trillion dollars, and where did it go? A good percentage had to make its way into someone’s pockets. It surely did not make its way to the middle class or lower, so the program works, for them.
Couldn’t have said it better myself! Keep the discussion going by hopping over to the comment section and adding your thoughts!
|Other Developments of the Day|
Moody’s Investors Service took the scalpel to its Russian sovereign debt rating, cutting it to Baa2 from Baa1. That’s the second-lowest possible investment grade rating, so it wouldn’t take much to push Russia into “junk” territory. The country has shelled out more than $13 billion in the last month alone to prop up its ruble currency amid tighter sanctions and a weakening economy.
Will the Federal Reserve end its useless QE program at the Oct. 28-29 policy meeting? The Wall Street Journal’s unofficial Fed mouthpiece reporter, Jon Hilsenrath, says yes in an article today.
Those days of 10 percent+ GDP growth in China? They’re long gone, according to a new report from the Conference Board. The research group expects Chinese GDP growth to slow towards 3.9 percent over the next few years from 7.7 percent in 2013, a significant challenge for a world that’s lacking growth.
Is Adidas AG going to sell off its Reebok sneaker business? That’s the speculation making its way through the market. The Hong Kong private equity firm Jynwel Capital and Abu Dhabi’s sovereign wealth managers are reportedly behind a push to buy Reebok for around $2.2 billion.
Until next time,
P.S. All enrollment for Martin’s Ultimate Retirement Course CLOSES TOMORROW! Make sure you click here to register for this FREE course while there is still time!