The Dow Is Just 6% from a 10,000-Point Rally

I’m back in the office after a nice, relaxing week off. The stock market continued to rally while I was away, and the S&P 500 currently isn’t far from 1,700.

There’s going to be a lot more earnings news this week. So far, the overall earnings report has been pretty good although there have been some high-profile blunders. Microsoft ($MSFT), of course, is one. The stock got shellacked for an 11.4% loss on Friday. Fortunately, the other 19 stocks on our Buy List had outperformed the broader market on Friday. This is why I stress holding a diversified portfolio. You never know when one of your stocks will cause problems in the short term.

The Dow needs just another 6% for this to become a 10,000-point rally. We also crossed an interesting milestone last week. The S&P 500 now has $100 in earnings over the trailing 12 months. At the 1982 low, the whole index was going for $102. The S&P 500 first closed above $100 in in June 1968.

According to the latest numbers from S&P, the index is on track to earn $26.54 for Q2. That’s growth of just over 4% from last year’s Q2, but I think this will gradually be revised higher as earnings season grinds on. Wall Street currently expects the S&P 500 to earn about $109 this year and $123 next year. Again, the stock market is still reasonably valued going by most valuation metrics, and—this is a big “and”—assuming the future earnings projections are accurate. The S&P 500 raked in $97 last year. The earnings slowdown was very real but it seems to have ended last year. The only quarters with negative earnings growth were the third and fourth quarters of 2012.

One positive story for our Buy List is that Goldman has shifted Cognizant ($CTSH) from “neutral” to “buy.” I’m not exactly a fan of these upgrades and downgrades, but it’s nice to see that someone else agrees with you.

Posted by on July 22nd, 2013 at 9:27 am

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