2007-05-06 19:01 (New York)
By Michael Tsang and Daniel Hauck
Corporate America rallies to a record, investors can attribute
the bull market to its growing dependence on the Chinese.
of their sales from outside the U.S., up from 30 percent in
2001, according to S&P, whose index includes the biggest
corporations. The balance may tip this year as global growth
outpaces the U.S. The world economy will expand 4.2 percent in
2007, twice the U.S. pace, according to Goldman Sachs Group Inc.
generate more than half of revenue outside the U.S., led the S&P
500's 6.2 percent gain this year with profits that exceeded
analysts' expectations. The index is now 1.4 percent below its
peak reached seven years ago and even investors who used to be
pessimistic about stocks say demand from China and Germany will
push American shares higher.
$1.84 billion Traxis Partners LLC hedge fund in New York. ``To
the extent that the U.S. is slowing, other economies are
accelerating.''
who appeared on a July 1993 cover of Forbes magazine dressed in
a bear suit and correctly predicted the U.S. economy was
slumping into recession in 2001, expects the S&P 500 to climb 15
percent this year. The Dow Jones Industrial Average may rally 19
percent, he said.
three times faster than analysts' projections and helped send
the index up 0.8 percent to 1505.62 last week, compared with the
record 1527.46 reached on March 24, 2000. The 30-stock Dow
average closed at an all-time high four times during the five-
day period, and rose 1.1 percent to 13,264.62.
helped support the stock market's advance by making U.S.
companies' products cheaper in overseas markets.
by value, last week recommended shares of 34 companies that
receive 65 percent of revenue from abroad.
and also located in New York, said in an April 26 report that
investors should buy shares of 3M, the maker of products from
Post-it Notes to road signs, and American International Group
Inc., the world's largest insurer, in part because of their
overseas sales.
expansion since the 1970s, finance chiefs from the Group of
Seven industrial nations said in a statement last month. That's
lifted wages in developing countries such as China and boosted
spending on consumer goods such as televisions, computers and
automobiles.
weather an economic slowdown caused by a slump in real estate.
At least 50 mortgage lenders have halted operations, gone out of
business or sought buyers in the last year amid rising borrower
defaults.
annual pace last quarter, the slowest since 2003, the Commerce
Department said last month. Goldman forecasts the economy will
grow 2.1 percent this year. That compares with the International
Monetary Fund's prediction in April of a 4.9 percent global
expansion.
to have had much of an impact,'' said David Joy, who helps
oversee $156 billion as chief market strategist in Minneapolis
at RiverSource Investments LLC, a unit of Ameriprise Financial
Inc. ``Clearly, that's a bit of a surprise, and probably a real
departure from the way the world was 10 years ago.''
for S&P 500 companies last year, based on estimates compiled by
S&P, the New York-based unit of McGraw-Hill Cos. That's the
highest since comparable figures became available in 1999, said
Howard Silverblatt, S&P's New York-based senior index analyst.
the breakdown between U.S. and international sales and excludes
utilities and telecommunications providers, Silverblatt said.
outpace the U.S. for the first time since 2001. China, the
fastest growing of the world's 10 largest economies, expanded at
an 11.1 percent clip in the first three months of 2007, more
than economists forecast.
first-quarter profit surged by 52 percent, as revenue in China
increased 30 percent. Demand in Asia for adhesives, tapes and
automotive products drove growth in the industrial and
transportation group, 3M's largest division. The company's
shares have climbed 8.1 percent this year.
pace in six years in the fourth quarter. Gross domestic product
of the 13 nations using the euro will increase 2.3 percent in
2007, according to the IMF, higher than the fund's prediction of
2 percent growth in September.
its biggest sales increase in Europe since 1994 during the first
quarter as net income climbed 22 percent. The Oak Brook,
Illinois-based company's European sales exceeded that of the
U.S. last year, with Germany its biggest market by stores in the
region. McDonald's shares have climbed 13 percent this year.
bit,'' said Mauro Guillen, the director of the Lauder Institute
at the University of Pennsylvania's Wharton School in
Philadelphia. Coupled with the weaker dollar, ``it has a large
impact.''
Dollar Index, which tracks the dollar's performance against
seven currencies including the euro, the yen and the British
pound, fell to an all-time low of 78.91 on April 30.
earnings season began with results from Alcoa Inc. on April 10.
New York-based Alcoa, the world's largest aluminum producer, had
its most profitable first-quarter ever as increased demand from
China boosted prices.
S&P 500 members increased an average of 3.3 percent in the
January-to-March period, estimates compiled by Bloomberg showed.
That would have snapped 14 straight quarters of profit growth of
at least 10 percent, the longest streak since 1950.
results through last week on average posted earnings growth of
12 percent. The S&P 500 itself has climbed 4 percent since
Alcoa's report, while the Dow average has surged 5.5 percent.
foreign operations are boosting profits. AIG gets 49 percent of
its revenue from overseas, according to Morgan Stanley.
overseas growth -- without leaving home, said Michael Price, the
billionaire founder of Short Hills, New Jersey-based MFP
Investors LLC.
savings products outside the U.S. jumped 33 percent to $1.6
billion in the fourth quarter, the biggest gain in at least two
years. The New York-based insurer, which reports May 10, gets a
third of its profit from those businesses.
the world,'' Price said in New York. ``I don't see the foreign
risk there. I see the upside because of the higher growth.''
percent of all mutual funds tracked by New York-based Lipper
Inc. during the 10 years before he sold his former firm, Heine
Securities Corp., for $600 million in November 1996.
for some investors that buying shares of U.S. companies isn't
the best way to profit from the global expansion.
Weissenstein, who oversees $90 billion as chief investment
officer at Credit Suisse Holdings in New York. ``The bigger bang
for the buck is going to come from'' overseas companies, he
said.
creates buying opportunities in the U.S.
``high'' foreign sales in the April 26 report for clients. They
included Halliburton, Atlanta-based Coca-Cola Co., the world's
biggest soft-drink maker, and New York-based Altria Group Inc.,
the world's largest publicly traded tobacco company.
company, last month posted a 13 percent increase in first-
quarter profit on rising demand from the former Soviet Union,
the Middle East and Africa. The Houston-based company said in
March that Chief Executive Officer David Lesar would transfer
his office to Dubai, effectively giving Halliburton a separate
headquarters outside the U.S.
the report. ``We are essentially saying it is different this
time and that the traditional sector playbook no longer works.''