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Week on Wall Street

Marketplace Staff Jan 19, 2007

TESS VIGELAND Time to check the week on Wall Street. David Johnson is out of town. In fact, I believe he’s out of the country. So we’re talking today with Kim Clark at U.S. News and World Report. Hi, Kim.

KIM CLARK: Hey. It’s great to be here on a very confusing Friday.

VIGELAND: It is. Well, you know, it’s been a confusing week. What is going on with this market? It seems like we’re getting some decent earnings reports and yet the markets tank.

CLARK: These are the kind of weeks that make investors pull their hair out. We have a ton of statistics this week, but the most impressive one came out on Wednesday. And that’s when Standard & Poor’s issued their annual scorecard about how their indexes did against professional money managers. And as usual, 70 percent of professional money managers underperformed the Standard & Poor’s 500 Index.

VIGELAND: Oh my goodness. So they’re just as confused as the rest of us.

CLARK: And this week was an example. I heard traders talking about a tug of war, a lot of confusion. And that’s because the numbers were confusing. You had. . . The CPI came out this week, and you had. . . the annual number looked great: 2.5 percent. That’s a great inflation rate. But you look at December’s number and that’s a little scary. So they didn’t know how to read it.

VIGELAND: And again, hard to figure out why we had some good earnings. . . Apple and Motorola among them. . . and yet, the markets were down.

CLARK: Oh, I talked to traders who were saying, you know, even they couldn’t figure it out. Apple reported an increase of earnings. I think it was 78 percent. Stocks down $5, $10. Who can predict.

VIGELAND: And oil was down this week, and yet airline stocks were down. Yeah. Is there any way to figure out what’s going on here?

CLARK: Well, one of the things that came out that was sort of clarified by Friday with the good consumer confidence numbers was that the economy seems to be steadily growing, steadily. . . slow but steady, but nice. And so what you’re seeing I think is some clarity by Friday that things are going to be okay. You looked at the housing stocks. You know, Semtex reported pretty lousy earnings but their stock is up. Home Depot’s had a lot of trouble, but their stock is up. So maybe people are thinking that things are really going to be okay. There’s a lot of confusion but generally the optimism is there.

VIGELAND: Well, of course, earnings season continues in earnest next week and we’ve got AMEX, Texas Instruments, AMD, Sun Microsystems reporting. But it does seem like we are not getting the kind of double digit growth in earnings that we saw for a good chunk of last year.

CLARK: Well, you’re exactly right. Only 12 percent of companies have reported for the fourth quarter so far this year, but the numbers do not look as good as they’ve been in the past.

This quarter will be the first quarter in 18 consecutive quarters that we have not had double digit increases in profit. And that means a slowdown in corporate profits and, you know, what drives the stock market? The PE ratio. So you’re going to see a little bit of a slowdown.

Now, don’t cry for the stock market. It’s still making 8.5 percent. You know, I mean, 8.5 percent is nothing to cry about but it’s still going to be a little bit of a slowdown.

VIGELAND: Alright. Thank you, Kim.

CLARK: You bet. It’s always a pleasure.

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