Lousy Earnings No Obstacle for This Bull

by Rick Ackerman

The news has been so depressing lately that we find ourselves turning to the business section each morning for comic relief. Monday’s daily chortle required readers to juxtapose two stories: 1) the Dow Industrials, currently trading in record territory, have risen on 12 of the last 15 trading days; and 2) Q2 earnings for America’s biggest companies are set to decline for the fourth consecutive quarter. Is there something wrong with this picture?

A columnist for The Wall Street Journal embarrassed himself and his editors recently with the incredible theory that although U.S. corporate earnings do indeed stink, and have stunk for more than a year, they simply don’t stink badly enough to threaten the seven-year-old bull market. For the record, earnings for the quarter ended on June 30 are projected to fall 4.7% from a year earlier. This follows a 5% drop in the first quarter. Of course, who needs earnings when there’s a global flood of funny money pushing stocks higher?

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