The following is an excerpt from the October Market
Strategy. To see the full PDF,
S&P 500 Target
Looking beyond the capers in Washington, we maintain a
longer-term bullish stance.
Zacks editors collectively forecast a 2013 target of 1770 for the
year-end S&P 500. That would be a forward earnings yield of
6.5%. If we get towards the end of 2013 with U.S. GDP in
healthy shape and no U.S. recession on the horizon, a nice
stretch well above 1700 can feed on itself. Our collective
low is just under 1600.
Q3 Earnings Season
The quarterly earnings season is close. Low
expectations dropped the bar for surprises.
October forecasters see Q3 earnings up +1.4%. In early August,
forecasters anticipated +3.3% total earnings growth. At 498
companies, S&P 500 earnings in Q2 were up +2.5% on +1.9%
growth in revenues. S&P 500 earnings in Q1 were up +2.5% on
barely positive growth in revenues. For Q4, projected total
earnings stand at +11.7% overall, and at +8.4% without the
Finance sector. High Q4 estimates should come down.
Q4 GDP Growth
The San Fran Fed says,
"With the fiscal drag waning, we expect growth to pick up in
the fourth quarter and next year."
Zacks Sector/Industry/Company Telescope
(1) Within Health Care, the Medical Care
industry remains attractive -- an upgrade on Affordable Care Act
individual coverage. Drugs and Medical Products were
upgraded to market weight or just above too.
Take a Look At:
), a Zacks Rank #2 stock. It provides high-quality,
affordable healthcare services to members in Florida, New York,
Connecticut, Illinois and Indiana.
(2) Consumers shrug off worry. Focus on
very attractive cyclicals like Leisure, Autos, Tires, Trucks and
the Home Furnishing-Appliance industries within Discretionary
spending. Buying a new car, car parts, and furnishing a
home remain attractive. Other Consumer Discretionary and
Apparel industries became attractive in October. The
consumer is holding us up.
No Consumer Staples industry has a strong Zacks Ranks now.
Take a Look At:
), a Zacks Rank #1 stock. It is a leading global supplier
of automotive seating systems, electrical distribution systems
(3) The IT sector saw a big upgrade. This
globally exposed sector is on the way up. That's big news
from September to October. Ongoing strength is seen
Semiconductors and Misc Tech. (i.e. Outsourcing & Data
Processing). This speaks to growing use of small niche devices
and components and corporate upgrading. Electronics
Hardware and Computer Software PC companies showed up better in
early October too.
Take a Look At:
), a Zack Rank #1 stock. It is one of the leading worldwide
providers of semiconductor memory solutions.
(4) Industrials got stronger. Aerospace & Defense,
Business Products, and Business Services industries are the
highest ranked. Conglomerates and Rails and Trucking are
just beneath them. Six industries were below market.
Industrial industries exposed to global growth conditions are
(5) Telcos look better. They were upgraded to Market
(6) Finance has one very strong industry: Insurance.
Investment Banking & Brokering got a strong rank too.
Major Banks and Real Estate are at market. Weakness across
Finance speaks to why the taper did not happen in
September. Rising rates hurt home mortgage and real estate
(7) In Energy, $4 a gallon gas and costly electric bills make
alternatives more attractive. Alternate Energy industries
turned up on top. Oil-Integrated and Oil E&P are at
market. Focus on domestic production in the Bakken and
Marcellus shale. Oil Drilling and Pipelines went below market.
Coal is at the very bottom.
(8) One Materials industry is just above a Market Perform:
Building Products. Global growth worries put a bottom on
this sector. Not a turn up.
(9) Utilities overall are a poor choice overall.
To see John Blank's full October Market Strategy report,
LEAR CORPORATN (LEA): Free Stock Analysis
MICRON TECH (MU): Free Stock Analysis Report
WELLCARE HEALTH (WCG): Free Stock Analysis
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