AHEAD OF THE TAPE | By Kelly Evans Apni 0 The Dark Side of Strong Corporate Earnings A climbing stock market and strong corporate earn- veloped markets last year Raking It In ings aren't quite the bea- for the first time, HSBC es- Share of global capital timates. cons of light they once were expenditures That is fostering growth for the U.S. economy. estimate abroad but undercutting The first-quarter earn- 100% prospects in the U.S. The ings season kicks off Mon- nation's factors of produc- day, and it looks to be an- 75 tion, such as factories and other impressive one. The equipment, or capital stock, number of profit-warning 50 actually shrank in 2009 for announcements over the the first time in postwar past three months is near a 25 history. Business invest- decade low, according to ment did rebound last year, brokerage Brockhouse Coo- but the 15% increase, which per. Analysts expect S&P should have generated 1995 '00 '05 '10 500 earnings to rise 12% 380,000 jobs on average a Source: HSBC from a year ago, and that month, created only 78,000, may prove conservative. notes UniCredit economist A strong earnings season easing program in place. Harm Bandholz. The re- could push the S&P 500- Growth may firm up later bound appears largely to stock index to three-year this year. But the relative have been maintenance- highs, reckons Bank of weakness with each quarter driven, and investment has America Merrill Lynch raises a question: Why isn't leveled off since. strategist David Bianco. the U.S. economy accelerating? The moving of invest- Tenically stock-market Perhaps because corporate ment overseas and erosion is haine driven by of the nation's capital stock MacBook 20 DD DD F3 F4 F6 F7 F8 F10 % & * 4 6 8 O 5decade low, according to brokerage Brockhouse Coo- but the Da mus per. Analysts expect S&P 500 earnings to rise 12% 1995 '00 '10 should have generated 380,000 jobs on average a from a year ago, and that month, created only 78,000, may prove conservative. notes UniCredit economist A strong earnings season easing program in place. Harm Bandholz. The re- could push the S&P 500- Growth may firm up later bound appears largely to stock index to three-year this year. But the relative have been maintenance- highs, reckons Bank of weakness with each quarter driven, and investment has America Merrill Lynch raises a question: Why isn't leveled off since. strategist David Bianco. the U.S. economy accelerating? The moving of invest- Typically, stock market Perhaps because corporate ment overseas and erosion gains are one of the most earnings aren't being driven by of the nation's capital stock 12 bullish leading indicators, strength in the U.S., but to are no small matter. They and yet economists are some degree by its weakness. imply a lower potential marking U.S. growth figures Companies have moved pro- growth rate for the U.S. and down. First-quarter real duction and sourcing overseas higher structural unemploy- 15 gross domestic product to cut costs and to tap demand ment. As that reality dawns, looks to have expanded at in faster expanding markets. the corporate sector's only about a 2% annualized Capital spending in emerging strength may start to lose pace, even with the Obama markets like China and India its luster. 18 payroll tax cut and the Fed- has more than doubled in the eral Reserve's quantitative- past decade, and surpassed de- Email: tape@ws).com MacBook 20 F3 F4 F5 F6 F7 DD F8 A F9 F10 @ # % & 3 4 5 8 O O