Slowdown Signals Accelerate
Signs of an economic slowdown are becoming harder to ignore.
Whether it's a fourth straight decline in the Conference Board's leading economic indicators, a yield of just 3.98% on the 10-year Treasury note, a 500-point drop in the Dow since mid-September or commentary from some of the nation's largest industrial companies, evidence of a deceleration in growth is mounting.
"A mini-replay of the second-quarter soft patch may be shaping up," said Steven Wieting, an economist at Smith Barney.
Although Wieting cut estimates on fourth-quarter gross domestic product Thursday, he still believes the Federal Reserve will raise interest rates by more than 100 basis points in 2005, as the economy picks up steam.But heavy equipment maker Caterpillar (CAT) isn't quite as confident. "Central Bankers have discussed moving to neutral interest rates, but we expect such moves will be cautious and limited," the firm said in a statement Thursday. "Both moderate economic growth and surplus labor will keep inflation low." Caterpillar projected that world economic growth will slow to around 3.5% in 2005, from 4% this year. As a result, revenue at the firm is expected to climb just 10% next year, down from a projected 30% jump in 2004. While Caterpillar posted strong profit and revenue growth in the third quarter, high raw material prices crimped margins and fourth-quarter estimates were not increased, as some had hoped. In response, shares fell almost 4%, or $3.21, to $77.17. Diversified industrial giant Ingersoll-Rand (IR) also disappointed investors Thursday, despite reporting a 53% jump in earnings during the third quarter. The company said it expects to earn between $1.13 and $1.23 a share in the fourth quarter and between $4.80 and $4.90 for the full year. According to Thomson First Call, Ingersoll was expected to earn $1.28 in the fourth quarter and $4.90 for the year. The stock fell 3.4%, or $2.34, to $65.76.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV