Now we have a second possible ceiling: declining earnings expectations:
Fourth-quarter earnings rose to 10.8% from 10.3% last week, according to Thomson Financial.
More than 360 companies in the S&P 500 index have reported results as of late Thursday, and 66% of the results have surpassed Wall Street's expectations;16% have matched; and 18% have missed.
"The earnings so far have been in line with expectations," said Metz. "The real issue is guidance."
We have seen strong earnings growth for the last few years. However....
John Butters, senior research analyst at Thomson Financial, said the outlook for the first quarter has turned bleaker, he said. The first-quarter growth rate is now 4.7%, down from the projection of 8.7% at the beginning of the quarter.
Butters said the bulk of that decline comes from analysts cutting their earnings forecasts for the energy sector, which had been dealing with a fall in crude-oil prices and higher productions costs.
Also, companies are not raising their financial forecasts as much as he's seen in the past. He said 14 companies have currently lifted their forecasts for the first quarter; he usually sees higher outlooks from 25 companies at this point in the reporting cycle.
If this analyst is correct that a drop in energy earnings is a prime reason for the overall decreased guidance then we might see some surprises in the second quarter. Here is a chart of the crude oil tracking ETF. Right now the market is consolidating.
The cold US weather has helped to contribute to the recent rally. In addition, OPEC production cuts are now working their way through the oil market. And China and India are still growing at a fast pace which will increase overall demand.
