Page 25 - ARUBA TODAY

BUSINESS Monday 24 July 2017
A25

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The importance of bigger earnings for stock funds

By STAN CHOE for companies that sell a $100 per barrel in 2014.
AP Business Writer lot to customers in Asia, Eu- But crude’s price still isn’t
NEW YORK (AP) — This earn- rope and elsewhere. The stable. During June, it
ings season is off to a good euro has climbed about dropped as low as $42.05
start, and the encouraging 10 percent against the dol- on expectations that the
run is expected to keep lar this year, for example, world still has more oil than
going. which means that each it needs. Analysts have al-
Instead of excitement, euro of sales at the Apple ready pulled down their
though, the reaction so far store in Amsterdam is worth earnings expectations as a
from Wall Street has been more dollars than before. result, but did they do so by
more like quiet relief, and enough? And if oil’s price
funds that track the broad OIL IS A WILD CARD remains volatile, it could
stock market have only The strongest growth this re- have a big impact on en-
edged higher since earn- porting season is expected ergy companies’ earnings
ings reports began arriving to come from the energy for the second half of the
in earnest last week. That’s Specialist Mario Picone works at his post on the floor of the New sector, where analysts say year.
because the strong reports York Stock Exchange. This earnings season is off to a good start, profits more than quadru-
that are forecast would be and the encouraging run is expected to keep going. Instead pled from a year earlier. OUTLOOK IS KEY
of excitement, though, the reaction so far from Wall Street has
more a justification for the been more like relief. That’s because the strong reports that are Energy is the only area of For stocks to rise any more
big moves that stock prices forecast would be more a justification for the big moves that the market that’s more in- from their already lofty lev-
have already made rath- stock prices have already made, rather than reason for further ternational than technolo- els, companies will need to
er than reason for further gains. gy in terms of where it gets keep pumping out further
gains. Stock prices have (AP Photo/Richard Drew) its revenue, but the biggest earnings gains, even after
risen more quickly than factor is the higher price this reporting season closes.
earnings in recent years, vestments. So, depending get most of their sales from of oil. After plunging be- For the most part, that’s
and the two tend to track on how high interest rates abroad may end up this low $30 per barrel early last what analysts expect to
with each other over the climb and other factors, earning season’s stars, now year, crude has remained happen. The U.S. economy
long term. Stocks even rose corporate earnings may that Europe and develop- between $45 and $55 for continues to muddle along
when profits were shrinking need to keep rising just to ing economies around the much of this year. with modest growth, while
from mid-2015 into 2016, keep stock prices where world are showing more life It’s easier to make outland- other economies are ac-
which has the market at they are today. This report- after years of disappoint- ish percentage gains when celerating. Companies,
more expensive levels rela- ing season, analysts are ment. coming off a small base, meanwhile, have slashed
tive to corporate profits. expecting S&P 500 com- Those economic upturns, and energy companies’ their costs and are able to
Stock prices for companies panies to report a roughly coupled with a weakening profits were decimated by hold onto more of each
in the Standard & Poor’s 6 percent rise in earnings dollar, spell stronger results oil’s fall from more than dollar in revenue as profit.q
500 index are trading at per share from a year ear-
close to 21 times their earn- lier. That would be less than
ings per share over the last half the growth rate of the
12 months, for example. first three months of the
That’s well above their year, but the slowdown is
average price-earnings understandable given that
ratio of 15.5 over the last the first quarter’s growth
10 years, a period that in- rate was the fastest since
cludes both the Great Re- 2011.
cession and the long run- Among the trends to
up for stocks following it. watch for as companies
Of course, interest rates are report how they did from
still low, and investors are April through June:
willing to pay a higher price
for each dollar of earnings GLOBALISTS GLITTER
in stocks when bonds are Coming into this year,
offering small yields. But many expected President
rates are expected to con- Donald Trump’s “America
tinue climbing modestly, as First” policies to mean com-
the Federal Reserve raises panies that do most of their
short-term interest rates business at home would be
and begins paring back its the biggest winners.
massive trove of bond in- But the companies that