While major companies exhibited impressive profit growth in the third quarter, many also posted sluggish sales increases or actual declines.
A lot of multinational companies suffer from the economic slowdown overseas, including in Europe, Japan and China, and from the strong dollar, The Wall Street Journal
The eurozone economy grew only 0.1 percent in the second quarter from the first, Japan's economy shrank an annualized 7.1 percent in the second quarter and China's economy grew an annualized 7.3 percent in the third quarter, the slowest rate in five years.
Meanwhile, the dollar hit a seven-year high against the yen last week and a two-year high against the euro. A strong dollar hurts U.S. companies by making their foreign revenue worth less when converted to dollars.
As for earnings, while profits for S&P 500 companies are on pace to advance 7.7 percent in the third quarter from a year ago, revenues are on track to increase only 3.8 percent, according to The Journal.
"Still the theme is anemic revenue growth," Laton Spahr, a portfolio manager at OppenheimerFunds, told the paper.
"The easy cost cutting that has been done over the last five plus years is done," David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, told The Journal.
Jack Rivkin, chief investment officer at Altegris Advisors LLC, added, "Companies to some extent are running out of tricks."
Some experts express concern about profits too. While 66 percent of S&P 500 that reported profits through early last week exceeded expectations, only 43 percent topped estimates by more than 5 percent, Pankaj Patel, head of quantitative research at Evercore ISI, told Reuters
"The beat rate is artificially high, but people still watch that percent," Patel said. "They keep buying and the market goes higher."
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