Earnings for S&P 500 companies are on track to grow about 20 per cent this year, and analysts expect company profits to grow another 10 per cent next year, according to FactSet. But Jim Paulsen, chief investment strategist for the Leuthold Group, said that might be too optimistic because costs and interest rates are rising and global economic growth could slip.
“It’s a double whammy of slowing sales at the same time we may be starting to (see pressure on) profit margins,” he said. Paulsen said corporate earnings could fall next year, and smaller companies might have a hard time dealing with that.
“Large companies tend to operate with bigger profit margins, and they have more room as a result of that to allow them to cut and to deal with a slowdown,” he said.
The S&P 500 index added 15.25 points, or 0.6 per cent, to 2,738.31. The Dow Jones Industrial Average rose 190.87 points, or 0.8 per cent, to 25,461.70.
The Nasdaq composite sank 28.14 points, or 0.4 per cent, to 7,328.85. The Russell 2000 index of smaller-company stocks slipped 0.47 point to 1,547.51.
Stocks plunged in October, but last week was the market’s best week since March. One reason for that recovery was increased optimism about trade talks, as Chinese officials and President Donald Trump said a phone conversation between Trump and China’s President Xi Jinping had gone well. On Monday Xi promised to reduce costs for importers and raise consumer spending power, but he did not address the technology policy dispute between the US and China, a critical part of the trade impasse.
Berkshire Hathaway said its profit quadrupled in the third quarter as the value of its investments climbed. It also reported better results from its insurance and railroad divisions. Berkshire bought