Economists on Wall Street have been lowering their U.S. growth forecasts left and right in recent weeks, helping to lead many investors to sell stocks.
But Wall Street analysts are stubbornly holding on to their forecasts for continued strong earnings by corporations despite evidence to the contrary, The New York Times reports.
Analysts’ estimates for third-quarter earnings for companies in the Standard & Poor’s 500 Index has barely budged since July 1.
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The current consensus, according to Thomson Reuters, pegs third-quarter profit growth at 15.6 percent, down from a forecast of 17 percent forecast at the beginning of last month.
“Absolutely, the numbers look too high to us,” Doug Cliggott, an equity strategist at Credit Suisse, tells The New York Times. “In the last two or three weeks, we’ve had a slew of data showing our growth could be slowing a lot more than expected.”
Several companies, including Hewlett-Packard, have warned in recent days that their earnings will fall beneath previous expectations.
Some critics say the analysts’ opinions aren’t so valuable. “They are a bunch of lemmings and are impacted by their counterparts in the corporations they follow,” Douglas Kass, founder of hedge fund manager Seabreeze Partners, tells The Times.
Investors see plenty of reasons for bearishness on stocks. “We’ve seen some pretty bad economic data,” Douglas Kreps, portfolio manager at Fort Pitt Capital Group, tells The Wall Street Journal. “So the question is: are we going into a double-dip recession?”
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