Tuesday, June 21, 2011

S&P Profit Margins Have Now Peaked

Well, technically they peaked some time ago (contrary to mainstream media propaganda), but we were waiting for another quarter to confirm our findings. For the sake of recreating our results, courtesy of CapitalIQ, we ran an analysis for all S&P 500 companies excluding companies that belong to the S&P Financials Sector Index, ending up with a universe of 418 companies. Then we looked at the last 3 years of gross profit margins on a quarterly basis (13 data points), and did a simple average, simple median, and trimmed mean (excluding top and bottom 15%), and got the following result.

As is obvious, the trimmed mean (probably the best data indicator) has now declined for 4 quarters in a row, the simple average has been in a steady decline for 6 quarters after peaking at 43% in Q4 2009, and the median is practically in free fall and is now back to the summer of 2009 levels.

The take home observation is that regardless of how they are observed, corporate margins have now peaked, and any additional headcuts at the corporate level will be cutting straight into the muscle, leading to even further profitability deterioration. That the margin drop started well before the current quarter confirms that this is far more than just a commodity price inflation phenomenon (although it certainly does not help). The only possibility for bottom line corporate growth going forward is therefore revenue growth in order to grow absolute profitability (as margins are flat or drop), which will come from either economic growth or capex spending: the first of which has been purely artificial courtesy of limited monetary and fiscal stimulus, and the second has barely budged from multi-decade lows.

Faber: US Needs Devastating Crisis to Really Recover

Marc Faber, editor of the Gloom, Boom and Doom report, says the United States must go through "a devastating crisis" before a meaningful recovery can begin.

"An economy is like the human body. There are periods when rest is required," Faber told Barron’s. "In economic terms, that is a recession."

Faber also says there's no gold bubble forming.

"Not to own gold is to trust the value of paper money and the government's integrity," says Faber. "No one in his right mind could trust the U.S. government any more. The government's economic statistics are distorted and there is no consensus on how to solve the budget crisis."

Marc Faber
(Newsmax photo)
So people should own some gold, even though the price can correct by $100 or $200 an ounce, but investors should buy it as an insurance policy.

"The world is grossly underweight gold," Faber says. "It is flooded with U.S. dollars."

"Investors might be bearish about the U.S. dollar, but international dollar reserves exceed $9 trillion. Compared to that, there is very little gold."

Faber notes that the world has a dual economy. “In the economy of the super-rich, Bentleys and Rolls Royces and Ferraris and Porsches sit in front of fancy hotels,” he says. “At the same time, the economy of the workers and lower middle class is doing very badly.”

“Wage increases don't match cost-of-living increases. One symptom of inflation is a weakening currency.”

Bloomberg reports that the current-account deficit in the United States increased less than forecast in the first quarter as the country's income surplus climbed to a record. Economists forecast a $130 billion deficit, according to the median estimate in a Bloomberg News survey.

Meanwhile, others share Faber's dire prediction.

Economist, author and Yale University Professor Robert Shiller says
chances are 'substantial' that the United States is headed back into a recession.

A weak U.S. housing market and a murky global economy indicate that the country is at a "tipping point" at the edge of a fresh economic contraction.

Even though economic models suggest the economy is on the path to recovery, the United States is in unchartered territory, which makes models less valid due to all the unknowns lurking on the horizon.

"Forecasting models would say no" on the question of whether the U.S. will face a double-dip, Shiller tells The Wall Street Journal. "But I’m seeing signs that encourage me to worry about that."

Meanwhile, warns former Sen. Alan Simpson warns that a crisis will strike the U.S. economy within two years if politicians don't roll up their sleeves and address fiscal spending like they did in the 1990s.

Simpson, a Republican who co-chaired President Barack Obama's National Commission on Fiscal Responsibility, says the United States faces "the most predictable economic crisis in history" by 2013. His remarks echo comments made by his partner in studying deficit reduction, Democrat Erskine Bowles, according to CNS News.

The tipping point "will come when the rating agencies find out we Economy, Alan Simpson, Erskine Bowles have no plan" to seriously address federal spending and the national debt, Simpson says.

Ratings agencies such as Standard & Poor's and Fitch have said the United States could lose its top-grade ratings if it cannot manage its debt burdens and ensure timely payments to bond holders.

Sprott Fund Manager Likes Oil, No Love For Nat Gas, Uranium

Buy oil stocks, but avoid equities that are plays on natural gas and uranium. At least that's the advice of one Sprott Asset Management fund manager. Sprott's $169 million energy and natural resources fund, managed by Eric Nuttall, is bullish on oil, but cannot say the same of its feelings toward natural gas and uranium stocks.

Eric Sprott's Sprott Asset Management, perhaps most known for its founder's gold and silver investments, held stakes in Barrick Gold (NYSE: ABX - News), Eldorado Gold (NYSE: EGO -News), IAMGold (NYSE: IAG - News), MAG Silver (AMEX: MVG- News), Silver Wheaton (NYSE: SLW - News) and Extorre Gold Mines (AMEX: XG - News), among others at the end of the first quarter.

"Emerging economy demand (for oil) growth is outpacing the demand destruction that we are seeing in developed economies, namely United States," Nutall said in a Friday interview withReuters. The fund manager said the price of oil this year should range between $95-$100 and that natural gas prices will remain stubbornly low until 2015 when the U.S. becomes a major natural gas exporter.

Shares of Cameco (NYSE: CCJ - News), the world's second-largest uranium producer, have plunged by a third since the March earthquake that struck Japan led to an unprecedented nuclear fallout and unprecedented declines for nuclear stocks.

"For uranium, I think the outlook is awful. We have many countries effectively deciding to shut down all of their nuclear reactors," said Nuttall, who is underweight on uranium stocks, according to Reuters.

Is the Stock Market Flashing A Buy Signal?

Since the first trading session in May we have seen the stock market sell off. The old saying “sell in May and go away” was dead on again this year. Here we are 7 weeks later with the stock market continuing to lose ground. This extended sell off has everyone all worked up that this is the beginning of another market collapse.

Let’s take a quick look at the SP500 hourly chart covering the month of June.
As you can see, price is still falling but every couple of trading sessions we get some big money players nibbling on stocks accumulating shares and running the market higher. This type of price action is typically an early signal that the market is trying to bottom.

There are two key ingredients for a higher stock market and both have been missing from the mix for a couple months. The two key sectors which have a significant weighting in terms of the broader market are the financial and technology stocks.

Let’s take a look at the financial sector:
As you can see on the bottom of this chart, financials started to lag the market in late January. Ever since then this sector has been in a strong downtrend pulling the broad market averages lower with it. The good news is that this sector has just reached a major support zone and is looking ripe for a bounce and possible rally.

The other main ingredient to a higher stock market is the technology sector.

Looking at the technology sector:
Here we can see technology stocks have been pulling back for several weeks. Tech stocks are now trading down at a major support zone and they look oversold. A bounce from this level is very likely in the coming week.

Weekend Trading Conclusion:
In short, I continue to feel the market is trying to bottom here and we are at the tipping point when things get volatile and choppy just before we get a trend reversal in the S&P 500. Keep an eye on the short term charts of financials and technology sectors. Once they start making higher highs and higher lows on the 60 minute charts I believe it will be the start of a nice bounce and possible rally.

Foreclosure Mess May Take 60 Years to Clean Up

The sheer number of foreclosures is bogging down the foreclosure process to the extent that — at the present pace—it may take more than 60 years in some states to complete all the pending cases in some parts of the country.

In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm, The New York Times reported..

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years, the Times reported. In Florida, Massachusetts and Illinois, it would take a decade, the Times reported.

(Getty Images photo)
“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’” Herb Blecher, vice president of real estate data firm LPS Applied Analytics told The New York Times.

“Now you’re probably not losing any sleep.”

That’s hardly surprising, given that nationally there are about two million foreclosure cases already in the courts and another two million waiting to get there.

Not only are borrowers sleeping better, but many lenders seem to be in no hurry to add repossessed houses to their books.

After some banks admitted last year to processing foreclosures illegally by filing false court documents, regulators told them to reform their procedures, but things are moving so slowly that the deadline for doing so has been extended.

New foreclosure cases and repossessions are down nationally by about a third since last fall, LPS said. In New York, foreclosure filings are down 85 percent since September, according to the New York State Unified Court System.

The Orange County Register reports that Shaun White, RE/MAX Real Estate's VP of corporate communications, said the foreclosure process — which typically took 400 days in the first quarter of this year, versus 340 days in the first quarter of 2010 and 151 days in 2007 — needs to pick up speed.

Goldman Gushes Over Coal Stocks: PCX, BTU, CNX, WLT, ACI, ANR, CLD

Shares of Patriot Coal (NYSE: PCX - News) are soaring 3% after Goldman Sachs upgraded the stock to "conviction buy" from "neutral" while raising its price target on the stock to $29 from $28, citing valuation and Patriot's exposure to higher thermal coal prices. In fact, Goldman upgraded the U.S. coal sector to "attractive" from "neutral," citing the same catalysts, but the news isn't helping the Coal Stocks Index, which is down 0.3%.

Shares of Peabody Energy (NYSE: BTU - News), the largest U.S. coal producer, are up half a percent after Goldman upgraded that stock to "buy" from "neutral" while raising its price target on the stock to $75 from $74, citing Peabody's international thermal coal exposure and organic growth. Missouri-based Peabody has seen its shares slide 8% in the past month.

Shares of Consol Energy (NYSE: CNX - News), the second-largest U.S. coal producer, are fractionally higher, after Goldman raised its rating on that name to "neutral" from "sell" while boosting its price target on the stock to $59 from $49, implying substantial upside from where the shares currently trade.

Walter Energy (NYSE: WLT - News) is off 2% after Goldman pared its rating on that name to "neutral" from "buy" while slashing its price target on the stock to $140 from $157. Even the lower price target implies significant upside from where Walter currently trades. Arch Coal (NYSE: ACI - News) is off 1% while Alpha Natural Resources (NYSE: ANR - News) and Cloud Peak Energy (NYSE: CLD - News) are fractionally lower.

Corn Stocks Plunging to 1974 Low as China Adds Brazil-Sized Crop to Demand

Even a fifth consecutive year of record global corn harvests will fail to meet demand for food, fuel and livestock feed, reducing world stockpiles to the lowest in two generations.

Consumption will rise 3 percent in the next marketing year, a 16th consecutive annual gain that saw demand jump 66 percent, according to U.S. Department of Agriculture estimates. Inventory will drop to 47 days of use, the fewest since 1974, the data show. Waterlogged fields in the U.S., the largest exporter, will curb yields, Goldman Sachs Group Inc. says. Corn may jump 36 percent to a record $9 a bushel if conditions worsen, Morgan Stanley says.

Corn purchases are accelerating as droughts and floods limit output gains in everything from soybeans to wheat, driving the Standard & Poor’s Agriculture Index of eight commodities 60 percent higher in 12 months. China, the world’s second-biggest consumer after the U.S., will use 47 percent more than a decade ago, adding an amount greater than the entire crop of Brazil, the third-largest producer.

“There is a storm developing in agriculture,” said Jean Bourlot, global head of commodities at UBS AG in London. “If we have the slightest disruption in any part of the world, the effect on the price will be considerable.”

Corn has risen 5 percent in Chicago this year, even after dropping 7.4 percent last week to close at $6.60 on June 17. Today, the grain settled at $6.605, up 0.5 cent. Prices averaged about $7.02 since Dec. 31, headed for the highest annual average ever. While investors should be cautious for now, “long term, I think $6 to $7 is a normal price,” Bourlot said. Costs are rising for Tyson Foods Inc. (TSN), the biggest U.S. meat processor, and ethanol maker Archer Daniels Midland Co.

Commodity Index

The S&P GSCI index of 24 commodities advanced 5.6 percent this year, and the MSCI World Index of equities was unchanged. Treasuries returned 3.2 percent, a Bank of America Merrill Lynch index shows.

Global production will rise 5.6 percent to 866.2 million metric tons in 2011-2012, still too little to meet demand of 871.7 million tons, according to the USDA, which combines variable local marketing years for its estimates.

China’s pork consumption doubled in the past two decades and demand for chicken quadrupled, the USDA estimates, boosting requirements for grain-based animal feed. Surging energy prices and subsidies spurred ethanol production, with the U.S. industry using seven times more corn than 10 years ago.

“For the livestock industry, the ethanol industry, and the food industry, it’s going to be a food fight,” said John Cory, the chief executive officer of Rochester, Indiana-based Prairie Mills, which processes corn meal and corn flour. “Any kind of weather problems are really going to be a significant problem.”

U.S. Farmers

Corn fell last week as drier weather enabled U.S. farmers to complete about 99 percent of expected plantings by June 12. A total of 69 percent of crops were in good or excellent condition. Above-average prices will spur farmers to keep sowing even if it means lower yields, Goldman Sachs said in a report June 13. The USDA will release its next acreage and inventory estimates on June 30.

South American producers will also grow more, said Lawrence Kane, a market adviser at Stewart-Peterson Group in Yates City, Illinois. Corn planting starts in September in Argentina and a month later in Brazil.

Demand may not expand as fast as anticipated by the USDA as economic growth weakens. Indexes tracking manufacturing in the New York and Philadelphia regions contracted this month, reports last week showed. Japan entered its third recession in a decade, and the Australian economy shrank the most in 20 years in the first quarter. China raised bank-reserve requirements to a record last week to cool the fastest inflation in three years. (more)

Gold Stock and Gold Bullion Divergence

Gold stocks have underperformed the metal most of this year... but the breakdown has been glaring since early April.

“Short-term aberrations in markets are common,” says U.S. Global Investors chief Frank Holmes, “and this isn’t the first time gold bullion and gold equity prices have diverged.”

“Gold equities underperformed gold bullion in 2000 and 2008 during times of extreme market negativity and uncertainty. These previous instances have been merely temporary setbacks, and markets generally reverted to their long-term trends.”

Here’s a chart Frank believes tells the full story: “Historically, one could purchase about 4.4 units of the XAU for the price of an ounce of gold. That ratio fell to less than 3 units per ounce in the mid-1990s, when gold prices bottomed, but has averaged 5.2 units during the current bull market.”

“You can see from the chart,” Frank continues, “that today’s level is 46% above the historical norm at 7.6 units to one ounce of gold. By this measure, one can purchase shares of gold mining companies at their second-cheapest level in nearly 30 years.

“The extreme was in 2008 during the depths of the financial crisis; many share values quadrupled off of those levels.”

Potential 52% Return for this Stock: MLR

When President Obama's armored limousine got stuck in Ireland this May as it exited the U.S. embassy, it was this towing company's equipment that freed his vehicle, known affectionately as "The Beast."

Since receiving the president's nod, Miller Industries (NYSE: MLR) -- the world's leading towing and equipment recovery firm -- has been gaining attention.

The Tennessee-based company sells tow trucks, recovery vehicles, auto transporters and more and markets them under a number of reputable brands, including Century, Vulcan and Chevron.

Traders pushed shares to a multi-year high during this past June 13 trading week. The stock now appears to be forming a highly-bullish flag formation, offering an opportunity to potentially make a quick trading profit.

The flag is marked by the "flag post," in this case a large white engulfing candle, and the downward-sloping "pennant," which represents trading activity through the remainder of the week.

Flag formations typically resolve bullishly, creating buying interest that generally results in the stock moving higher and higher over time.

As this six-month daily chart shows, the stock is in a steady uptrend. But until recently, it has been capped by resistance around $17.

On Monday, June 13, however, shares shot up nearly $2, forming a very long bullish candle. The next day, the stock continued to rise, peaking at a multi-year high of $17.85.

Although the stock pulled back during the remainder of the week, the technical pattern is that of a highly-bullish flag formation, which typically leads to higher prices.

From a fundamental standpoint, Miller also looks poised to move higher. Shares are being lifted by strong sales. The company recently reported an increase in government-related contracts as well as strong demand for its products domestically and in Europe.

In early May, the company announced strong first-quarter results. Revenue for the period increased 50.7% to $108.9 million, from $72.3 million in the comparable period a year-ago.

The company is cautiously optimistic about the remainder of the 2011 year but expects second-quarter revenue to increase about 8% to $87.8 million, compared with $81.3 million in 2010.

For the full 2011 year, analysts project revenue will increase 24% to $380.6 million. By 2012, revenue is projected to edge up a further 6.4% to $405 million.

The earnings outlook is similarly strong.

Due to stronger sales volume on manufactured products as well as improved production and successful cost reduction initiatives, first-quarter 2011 earnings per share surged 270.6% to $0.61, compared with $0.17 in the year-earlier period. Analysts expect second-quarter earnings to increase around 19% to $0.31, from $0.26 per share.

With strong growth projected over the full 2011 year, analysts expect full-year earnings to rise more than 60% to $1.54, from $0.96 share.

Miller is also attractively valued based on its low trailing price-to-earnings (P/E) ratio of about 12 and forward P/E about 11. The stock also has a price-to-sales (P/S) ratio of about 0.6.

As a liquid company with $39.1 million in cash and only $33,000 in long-term debt, the company has the financial freedom to take measures to increase shareholder value. As a result, in mid-May, Miller announced the initiation of a $0.12 per quarter dividend. This gives the shares a reasonable yield of almost 3.0%. The company also announced a $20 million share repurchasing program.

A Speculative Energy Play: LNG

Cheniere Energy is a speculative play on liquefied natural gas that may be worth looking into, Cramer said Monday.

The company [LNG 8.17 0.17 (+2.13%) ] has three natural gas receiving terminals, although only one is active, and 94 miles of pipeline. But what Cramer likes most is that the company plans to build a liquefied natural gas export facility that should be up and running by 2015, as long as it gets approval from the Federal Energy Regulatory Committee.

But make no mistake, he said, the name is “as speculative as it gets.” The company has no earnings until 2015 and it’s a small company with a $665 million market cap. The stock has shot up about 150 percent in the last twelve months, and is a “wild trader.”

To find out more about Cheniere, Cramer spoke to its Co-Founder, Chairman and CEO, Charif Souki. To see the full interview, watch the video.

Stocks Cheapest in 26 Years as S&P 500 Falls, Earnings Rise 18%

For the second time since the bull market began, profits are surging and stocks are falling.

Standard & Poor’s 500 Index companies will earn 18 percent more this year than in 2010, according to the average estimate of more than 9,000 analysts compiled by Bloomberg. Higher profits haven’t stopped the gauge from falling 6.8 percent since April 29, pushing valuations to the cheapest levels in 26 years. Even if companies posted no growth, price-earnings ratios would be lower than on 96 percent of days in the past two decades.

The combination of China raising interest rates, concerns about a Greek default and the end of the Federal Reserve’s $600 billion stimulus program have almost wiped out this year’s gains. The divergence between profit forecasts and economic indicators shows the challenge to investors after the S&P 500 gained 88 percent from a 12-year low in March 2009.

“The market is not willing to pay for future growth,” said Nigel Holland, who helps oversee $516 billion at Legal & General Group Plc in London. “Provided there is better data, it will stabilize,” he said. “The market probably has room to rise 10 percent by year-end.”

The S&P 500 climbed less than 0.1 percent to 1,271.50 last week, snapping its longest retreat since 2008, after reports on jobless claims, retail sales and Chinese industrial production exceeded economists’ forecasts and German Chancellor Angela Merkel retreated from demands that bondholders be forced to swallow losses in a Greek rescue.

The S&P 500 advanced 0.5 percent to 1,278.36 at 4 p.m. in New Yorktoday.

Longest Streaks

Equities also got a boost as retailers Best Buy Co. and Kroger Co. (KR) said they would match or exceed predictions for 2011 income. The advance pared the S&P 500’s loss from its 2011 peak of 1,363.61 on April 29 to 92.11 points.

At 34 days, the decrease is the second longest since the bull market began. The 16 percent tumble from April to July 2010 lasted 49 days, Bloomberg data show. This year’s retreat has coincided with a decline in predictions for 2011 gross domestic product growth to 2.6 percent from 3.2 percent, according to the median estimate of 83 economists surveyed by Bloomberg.

Losses since April have pushed the price of the S&P 500 to 14.5 times the past year’s earnings, compared with the average of 20.5 since June 1991, according to Bloomberg data. The gauge is valued at 8.7 times cash flow, cheaper than in 81 percent of occasions since 1998. The gauge is priced at 2.1 times book value, or assets minus liabilities, lower than it has traded 90 percent of the time since 1995.

Not Excessive

“Even in the assumption that earnings growth is zero, valuations would not be excessively high,” said Patrick Moonen, who helps manage $537 billion at ING Investment Management in The Hague, Netherlands. “We are below consensus in the estimated earnings growth, and still think the corporate momentum is very strong.”

Disappointing reports since May on housing, employment and manufacturing have heightened concerns that $600 billion in Treasury purchases by the Fed have failed to bolster growth. The S&P 500 posted its biggest weekly decline since August in the period that ended June 3 after the U.S. jobless rate unexpectedly climbed to 9.1 percent and payrolls expanded at the slowest pace in eight months. A report from the Institute for Supply Management on June 1 showed that manufacturing expanded at the lowest rate in more than a year.

Greek Swaps Soar

The cost of insuring against defaults on Greek, Irish and Portuguese government debt surged to records last week on concern governments will fail to impose spending cuts needed for a European Union debt restructuring.

Credit-default swaps on Greece soared as much as 459 basis points to 2,237 on June 16, according to CMA prices, meaning it cost more than 2 million euros ($2.9 million) a year to insure 10 million euros worth of the nation’s debt.

They traded at 1,932.75 basis points as of 4:30 p.m. in London on June 17 as Merkel backed down from her demands and said she’d work with the European Central Bank to avoid market disruptions.

Investors are concerned about slowing growth in the U.S. and Europe’s sovereign debt crisis at the same time policy makers in China, the world’s second-largest economy, are trying to cool expansion. The country’s central bank has raised the reserve-requirement ratio for lenders 11 times and boosted interest rates four times since the start of 2010 to keep inflation in check.

Lehman, 1980s

Analysts are boosting profit forecasts even with the global economy showing signs of weakness. S&P 500 earnings may rise to $99.61 a share in 2011 from $84.58 last year and $61.52 in 2009, according to data compiled by Bloomberg. That’s an increase from the forecast of $95.37 on Jan. 3 and $98.70 on April 29, the data show.

Should stocks stay at current prices and the analyst prediction come true, the S&P 500 would trade at 12.8 times income on Dec. 31, the lowest level since 1985 except for the six months after Lehman Brothers Holdings Inc.’s bankruptcy in September 2008 and nine months in the late 1980s, according to Bloomberg data. Companies in the S&P 500 are forecast to earn $24.31 this quarter, up from $24.16 at the start of April.

Concern the slowdown will lead to another recession will weigh on stocks even as companies report higher income, said Doug Cliggott, Boston-based equity strategist at Credit Suisse Group AG. He said the S&P 500 will be little changed through year-end.

Not Extreme

“We wouldn’t put the market now as extremely rich or in a sense extremely attractively valued,” Cliggott said in an interview on Bloomberg Television’s “InsideTrack” with Deirdre Bolton on June 13. “Price-earnings multiples will be at or below their historical averages because of all the uncertainties on future growth.”

Stocks may also have to do without more stimulus from the Fed, which will complete its second round of Treasury purchases this month. While Fed Chairman Ben S. Bernanke said during a June 7 speech in Atlanta that record monetary stimulus is still needed to boost the “frustratingly slow” U.S. economic recovery, he gave no indication that the central bank will start a third round of so-called quantitative easing.

Retreats in the S&P 500 that exceed 5 percent are common during bull markets, according to data from Birinyi Associates Inc., the Westport, Connecticut-based money manager and research firm. During the nine rallies between 1962 and 2007, the S&P 500 fell that much an average of seven times, the data show. The index has posted nine such retreats during the current advance.

‘Strong Backbone’

Global investors increased their cash holdings to the highest level in a year this month as hedge funds slashed the amount of borrowed money invested in stocks, a survey from Bank of America Corp. (BAC)’s Merrill Lynch unit showed on June 14.

“Valuation is a strong backbone,” ABN Amro Private Banking Chief Investment Officer Didier Duret, who manages about $200 billion in Geneva, said in a telephone interview. “It’s more or less a reflection of how reluctant investors have been to get back into the equity market.”

Kroger in Cincinnati rose 4.5 percent, the most since October 2009, to $23.99 on June 16. The largest U.S. grocery chain increased its fiscal 2012 earnings forecast to as much as $1.95 a share from $1.92. Analysts, on average, estimated $1.90.

Best Buy, the world’s biggest consumer-electronics retailer, rallied 4.6 percent two days earlier after reporting profit that exceeded analysts’ forecasts, helped by rising demand for smartphones. The Richfield, Minnesota-based company reiterated its full-year projection for earnings per share of $3.30 to $3.55, excluding restructuring costs. Analysts predicted $3.47.

To Alison Porter at Ignis Asset Management, stocks have priced in prospects for a Greek default and the end of the Fed’s bond-buying program.

“We are seeing stable growth, but it is not a strong cyclical recovery,” said Porter, who as U.S. equities fund manager in Glasgow helps oversee $123 billion. Still, “valuations in the market should provide some support,” she said. “Equities are reasonably well positioned from here.”