Expectation for the S&P
Interview: Miller Tabak---Boockvar, Peter---Equity Strategist
>> welcome back. are you watching the “world financial report” and we are watching the latest earnings numbers for you. the latest coming in is hispanic broadcasting corp. second quarter earnings 12 cents a share, profit excluding items 14 cents a share. let’s see if we can see exactly what the thompson financial estimate was, 11 cents here. so the question is does that compare to the 12 cent number of the exitems number of 14 cents. either way it exceeds overall. ebitda $25 million to $27 million for the third quarter. that’s what they see ahead. also talking about third quarter revenue for hispanic broadcasting, up 10% to 13% in the current quarter. it also said that a court has denied reconsideration of the s.b.s. deal. there has been talk of merger in the spanish broadcasting arena and hispanic broadcasting corp is currently down 3/4 of 1 percent. moving on. le branch and company robert murphy quit as vice chairman of the new york stock exchange, stepping down after the firm resisted demand it turn over emails in alleged trading ryelations. the company said two weeks ago it was charged by the nyse with failing to cooperate in the probe. le branch denied the charges saying it’s cooperating with all legitimate requests, but will not provide personal correspondence that it says is irrelevant to the probe. the investigation centers on whether the five biggest specialist firms violated their obligation to stand away from a participation of a buyer and seller to be matched.
>> 1,000 is the magical level for the s&p 500 to break through in recent weeks. they say once that level is reached the market may be in for choppiness.
>> peter buck bar joining us with his view on the market right now. got the chart up here on the s&p going back to the beginning of the year. we may have hit somewhat of a plateau in that 1,000 level which ecan draw a quick line on. it’s very obvious right are. it gets up there a little bit. it pulse back each time. what’s your expectation for the s&p at this level?
>> the question going forward is to what extent does the economy continue to rebound and what the resulting increase in corporate profitability is. on one hand and what the bond market’s response to that improvement in the economy on the other hand. we had this rally from the march lows in anticipation of a rebound in the economy. the stock market was right in their discounting of an improvement because we’ve seen that in the numbers over the last three weeks. over the last couple of weeks we’ve seen a negative response from the bond market with respect to higher interest rates. not only taking out the deflation premium that the fed built into the bond market but in response again to the improving economy. going forward, we do expect to see continuation of the improvement in the economy and profitability. we just need to see the 10-year bond yield to stay in a 4% to 4.5%-type range where we are in right now. that will be the key to the market going forward.
>> at this point it’s been pretty jarring to people seeing a lot of movement.
>> the market reaction is to the initial surge in interest rates. if you take a step back back 4.5% on the 10-year, a real yield of 2.5% is historically low, the low we saw in the 1960’s. if you want to take a step back and look at the real rates, it’s low. but going forward, if we start to see a further increase in interest rates, i’m talking 5, 6 7% in the 10-year, then the market is going to have issues. but --
>> the market has issues already. doesn’t it? take a look at this and we have a runup and then have choppy trade directly related to the interest rate concerns and the way the bond market is performing.
>> the market’s issue now is the new reality of 4% to 4 the 5% type 10-year interest rates. historically that’s low. i think over the next couple of weeks the market will quickly adjust to this new reality. and again, be back to focusing on is the economy showing signs of improvement.
>> what if the fed makes it clear they certainly are not talking about cutting again or thinking about that. they are moving into a phase where they expect to start raising rates. what is that going to do to the equity market.
>> i think the fed is going to make a concerted effort next tuesday at their meeting saying we are going to keep short term interest rates low and almost eliminate the possibility of a des. the fed has a very difficult job tuesday, next week, because they create thd mini combustible in the bond market with their comments. we have seen an unwinding of that. the fed has to do their best to try to patch up some of the damage that they’ve created. that, in my opinion, is the issue for the stock market looking out 12 to 24 months. is higher interest rates in response to not only an economic improvement in the united states but globally with easy money sloshing around the world. with the money supply growth here particularly running at an annualized 8%. i think the investors have to be aware of much higher interest rates much much higher than what we’ve seen right now.%
>> as we look at the chart, is this over and is this what we can expect to see for the rest of the year?
>> i think the market is going to make another attempt to go higher. that is because the economic data will continue to show improvement while the rate of interest rate increases will dramatically slow from here. but with that said, i don’t expect on a percentage increase much higher from this consolidation period we are in right now.
>> thank you very much, peter boockvar, an equity strategist at miller tabak. the world’s largest drug company may not be alone in halting sales to canada.
