Newspaper article THE JOURNAL RECORD

Outlook Positive for 3rd Quarter Results

Newspaper article THE JOURNAL RECORD

Outlook Positive for 3rd Quarter Results

Article excerpt

NEW YORK -- U.S. companies begin the parade of third quarter earnings reports this week, and investors expect to be cheering as the numbers go by.

A growing economy with little pickup in inflation is keeping interest rates steady, and that means a great environment for businesses.

Lower rates encourage spending on goods and services, while cutting the cost of financing business. Smaller companies should do relatively better than large businesses. Most small companies do little export business and thus aren't hurt by the strong dollar, which makes U.S. goods more expensive. "We continue to be in an ideal environment for small company stocks," said J. Gary Craven, of small-stock investing at Evergreen Keystone Investments, which manages more than $3 billion in assets. "We have low and falling interest rates; we have plenty of opportunities for companies to provide products and services which should be very profitable -- and that leads to a strong earnings growth outlook." That means stocks should rise in reaction to the earnings. Industry analysts forecast third quarter earnings for the companies in the S&P 500 will rise 12.2 percent from last year's level, while they expect the companies in the Russell 2000 to see profit growth of 21.7 percent, said Chuck Hill, director of research at First Call. Earnings for the S&P 500 have grown at double digits in 20 of the last 22 quarters, stretching back to 1992. A recent drop in interest rates could help support profits down the road. The benchmark 30-year Treasury bond is yielding 6.29 percent, from 6.60 percent one month ago. Last week, the S&P 500 gained 0.5 percent, rising 4.57 points to a record 960.46. The Dow Jones Industrial Average rose 116 points, or 1.5 percent, to 8038.58, still below its Aug. 6 record of 8259.31. The Russell 2000 Index of small-company stocks set a record every day last week, tacking on 18.64 points, a 2.4 percent gain. WorldCom's $34 billion bid Wednesday for MCI Communications prompted a round of takeover speculation in telecommunications stocks. Teleport Communications Group jumped 8 percent, even after losing 2 points Friday. The Federal Reserve on Tuesday left the overnight bank lending rate unchanged at 5. …

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