Specter of Inflation Rises Again
THE DOW JONES INDUSTRIAL AVERAGE SLIPPED below 12,000 last week for the first time since crossing the historic level in October as higher-than-expected wage growth and rising oil prices put pressure on the market.
While investors were pleased to see the unemployment rate drop to 4.4%, the lowest level since May 2001, they were concerned about the inflation implications arising from the 0.4% increase in average hourly earnings. That's above the more modest 0.2% most assume the Federal Reserve is comfortable with and it implies that the Fed is unlikely to lower interest rates any time soon. Indeed, the 10-year Treasury yield backed up to 4.72%. from 4.67% a week earlier.
More pressure came from the $1.26 pop in crude oil prices on Friday to $59.14 after U.S. diplomats in Nigeria warned that militants are planning kidnappings and bombings in oil-producing areas. The Dow ended the day down 32.50 points at 11,986.04, for a 104.22 loss for the week. Likewise, the S&P 500 declined three points Friday and 13.04 points on the week to end at 1364.30. Nasdaq had the smallest percentage loss on Friday, declining 0.1%, or 3.23 points, to 2330.79, a 19.83-point decline over the five sessions.
The broader markets have been helped in recent weeks as investors flocked to economically sensitive sectors in hopes that the economy was cooling enough to prompt the Fed to lower interest rates early in 2007. In anticipation of lower rates, investors piled into shares of retailers, financials and real-estate-related stocks. But those segments sold off as a rate reduction appears to be postponed thanks to Friday's higher wages and continued news that companies have pricing power. Most recently, on Friday FedEx (ticker: FDX) announced plans to increase air shipment rates by 5.5% at the start of next year.
"It's going to be hard to make the case that over the next three years inflation will be less than 3%," notes Thomas McManus, chief investment strategist at Banc of America Securities.
Earnings are likely to drive the market's direction over the near term. With more than 80% of companies' results in, third-quarter earnings for the S&P 500 appear on track to climb by more than 18% in the third quarter, according to Thomson Financial. That easily tops the 15.3% growth forecast on July 1. However, estimates for the fourth quarter have gradually declined to 10% earnings growth, down from 12.8% forecast at the start of October and 14.7% on July 1.
McManus notes that third-quarter earnings may be artificially inflated by three percentage points by three items: insurance industry results, a Fannie Mae (FNM) estimate and the merger of Bank of America (BAC) and MBNA.
Insurance earnings have been great this year due to the lack of losses from hurricanes -- a dramatic change from '05, when results were depressed by losses from Hurricane Katrina. Indeed, after the market closed Friday, Berkshire Hathaway (BRK.A) reported net income rose by to $2.77 billion in the September quarter from $586 million in the same quarter a year earlier.
Oddly enough, earnings estimates are also inflated by one analyst's estimate for third-quarter earnings for Fannie Mae of $1.15. Last year the agency didn't report earnings, so no earnings are included in the tally of the S&P 500 for the company. Along the same lines, Bank of America's earnings this year include its acquisition of MBNA. The 2005 numbers haven't been adjusted to include the acquisition, so earnings gains look outsized.
Once these items are taken out of the equation, McManus estimates, third- quarter results rose about 15% and about half of those earnings come from companies in the financial and energy sectors, which traditionally sport below-market multiples. And earnings from energy companies are about to get much tougher as commodity prices have leveled off. He warns: "Valuation is no where near cheap enough to protect you if a deceleration of earnings is to come. We think the market is vulnerable to a 5% to 10% correction in the next six to 12 months." His recommendation: Stick with large cap stocks that are less likely to disappoint in a decelerating economy, where earnings growth slows to 5% to 6% next year.
SPECIALTY RETAILERS HAD A HARD TIME of it in October generally, and last Thursday it was Chico's FAS's (CHS) turn. The company, which operates nearly 900 women's specialty stores, including Chico's and White House/Black Market, said October's same-store sales fell 4.1% from a year earlier.
After more than nine consecutive years of positive same-store sales, October was the second negative number in three months (August was down 2.6%, while September was up 2.1%). Chico's also lowered its third-quarter earnings outlook to a range of 22 to 25 cents a share versus market expectations of 26 cents. Meanwhile, total sales for the four-week period and three months ended Oct. 28 increased 10% and 12%, respectively.
Chico's stock dropped about 13% last week to 20.85, and actually has been falling like a stone for much of 2006, as growth for this formerly highflying stock -- it reached nearly 49 in February -- has slowed from the torrid 30%-40% rise of the last two years. Many worry the concept has matured.
But is the Chico's concept broken or are Chico's shares on sale? James Hardesty, chief investment officer at Hardesty Capital Management in Baltimore, began buying shares back in August and September, and he bought some more last week.
通胀隐忧再现
自10月份突破12,000点大关后，道琼斯指数上周首次跌至这一水平之下，原因是高于预期的薪资增幅和油价的上涨给市场带来了压力。
尽管失业率降至4.4%的2001年5月以来新低令投资者感到高兴，但他们担心通货膨胀率会因每小时平均工资增长0.4%而走高。这高于美国联邦储备委员会(Federal Reserve)能够接受的0.2%的水平，也显示Fed不太可能在近期内下调利率。实际上，10年期美国国债的收益率已经从一周前的4.67%回升到4.72%。
更大的压力来自于原油价格上周五上涨1.26美元，达到每桶59.14美元。此前美国驻尼日利亚外交官警告说，武装人员计划在该国的产油地区实施绑架和爆炸活动。道琼斯指数上周五下跌32.50点，收于11,986.04点，全周共下跌104.22点。标准普尔500指数上周五下跌3点，全周共下跌13.04点，收于1364.30点。那斯达克指数上周五跌幅最小，下跌3.23点，跌幅为0.1%，收于2330.79点，全周累计下跌19.83点。
大盘近几周来因投资者踊跃买进经济敏感类股而不断上扬，市场人士预计经济的降温幅度将足以使得Fed在2007年初下调利率。因寄希望于降息，投资者大肆买进零售、金融和房地产类股。但由于上周五的工资涨幅数据和这些公司仍掌握着定价力的消息，人们对降息的预期被推迟，这类股票也受到了抛售。联邦快递集团(FedEx)就在上周五表示，将从明年开始将空运价格上调5.5%。
美银证券(Banc of America Securities)首席投资策略师托马斯?麦克麦纳斯(Thomas McManus)指出，今后三年里通货膨胀率恐怕很难降至3%以下。
季报更有可能主导市场近期的走势。Thomson Financial认为，随着80%以上的公司季报都达到了预期，标准普尔500指数第三季度盈利增幅有望超过18%。这个数字远远超过了7月1日时所预测的15.3%。然而，对第四季度的盈利增幅预期已经从7月1日时的14.7%、10月初的12.8%逐步降至10%。
麦克麦纳斯指出，第三季度盈利增幅或许被人为夸大了3个百分点，这主要是受到三个因素的影响：保险行业的业绩，联邦国民抵押贷款协会(Fannie Mae, 简称：房利美)的业绩预期，以及美国银行(Bank of America Corp.)与MBNA的并购交易。
由于没有受到飓风灾害的骚扰，保险行业今年的业绩十分出色，而在2005年，该行业因赶上卡特里娜飓风而损失惨重。上周五收市后，Berkshire Hathaway公布截至9月的季度净利润增至27.7亿美元，而上年同期的数字仅为5.86亿美元。
颇为令人不可思议的是，一位分析师对房利美第三季度业绩所作预期（每股收益1.15美元）也给整体收益预期注入了水分。去年，房利美并未公布业绩，因此在统计标准普尔500指数成份股的业绩时并没有把该公司包括在内。此外，美国银行今年的业绩还包括了并购而来的MBNA所作的贡献。2005年的数据并没有经过并购因素的调整，所以今年的收益增幅看起来颇为可观。
麦克麦纳斯估计，如果把这些因素剔除在外，第三季度盈利的增幅应在15%左右。半数盈利增幅来自金融和能源行业的贡献，这两个行业的估价向来低于市场平均水平。随着能源价格的回调，能源企业的盈利前景即将变得严峻起来。他警告说，如果盈利增长开始减速，目前的市场估价无法充分起到保护投资者的作用。我们认为今后6-12个月里，市场有可能出现幅度为5%-10%的回调。麦克麦纳斯的建议是：在明年盈利增幅可能放缓至5%-6%之际，坚决持有那些相对不会令人失望的大型股。
