January 1, 2013 in Business

Outlook optimistic for 2013

Steve Rothwell Associated Press
 

NEW YORK – It may be a big if, but assuming Washington lawmakers can get past the “fiscal cliff,” many analysts say that the outlook for stocks this year is good, as a recovering housing market and an improving jobs outlook help the economy maintain a slow but steady recovery.

An advance of 10 percent in 2013 would send the S&P 500 toward, and possibly past, its record close of 1,565 reached in October 2007.

A midyear rally in 2012 pushed stocks to their highest levels in more than four years. Both the Standard & Poor’s 500 and the Dow Jones industrial average gained in 2012. Those advances came despite uncertainty about the outcome of the presidential election and bouts of turmoil from Europe, where policymakers finally appear to be getting a grip on the region’s debt crisis.

“As you remove little bits of uncertainty, investors can then once again return to focusing on the fundamentals,” says Joseph Tanious, a global market strategist at J.P. Morgan Funds. “Corporate America is actually doing quite well.”

Although earnings growth of S&P 500-listed companies dipped as low as 0.8 percent in the summer, analysts are predicting that it will rebound to average 9.5 percent for 2013, according to data from S&P Capital IQ. Companies have also been hoarding cash. The amount of cash and cash-equivalents being held by companies listed in the S&P 500 climbed to an all-time high $1 trillion at the end of September, 65 percent more than five years ago, according to S&P Dow Jones Indices.

Stocks in the S&P 500 index are currently trading on a price-to-earnings multiple of about 13.5, compared with the average of 17.9 since 1988, according to S&P Capital IQ data.

The stock market will also likely face less drag from the European debt crisis this year, said Steven Bulko, the chief investment officer at Lombard Odier Investment Managers. Policymakers in Europe appear to have a better handle on the region’s problems than they have for quite some time.

S&P’s biggest winners, losers in 2012

The following is a list of the five biggest gainers and the five biggest losers in the Standard & Poor’s 500 index in 2012.

The winners:

PulteGroup. Signs that a housing market rebound is under way boosted this home builder’s stock 187.8 percent to $18.16.

Sprint Nextel. The wireless carrier sold a 70 percent stake to Japanese cellphone company Softbank Corp. for $20.1 billion. The stock jumped 142.2 percent to $5.67.

Whirlpool. Surging profits at the Benton Harbor, Mich.-based appliance maker sent its stock surging 114.4 percent to $101.75.

Expedia. Profits rose sharply at the online travel agency and the company paid a special dividend. Expedia gained 111.7 percent to $61.14.

Bank of America. A poster child of the financial excesses of the last decade, the bank accelerated a cost-cutting plan and is gradually reducing the amount of cash it set aside to cover bad loans. The stock gained 108.8 percent to $11.61.

The losers:

Apollo Group. The for-profit education company behind the University of Phoenix got a D from investors. Slumping enrollments and tighter regulatory scrutiny pushed the stock down 61.2 percent to $20.92.

Advanced Micro Devices. Sales of AMD’s chips declined along with falling PC sales as consumers moved to tablets and smartphones. Its stock fell 55.6 percent to $2.40.

Best Buy. The consumer-electronics retailer struggled to hold on to market share in the face of tough competition from discounters and online retailers. Founder Richard Schulze wants to buy the company back. The stock dropped 49.3 percent to $11.85.

Hewlett-Packard. Where to start? The fallout from a disastrous acquisition combined with a faltering PC and printer business hit the stock hard. H-P slumped 44.7 percent to $14.25.

J.C. Penney. The retailer’s new strategy of eliminating sales failed miserably, alienating old customers and failing to lure new ones. The stock dropped 43.9 percent to $19.71.

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