As to tying this all into the overall stock market's outlook, an abrupt rise in interest rates as we have just witnessed -- Friday's rate rise was the largest one-day increase in nearly five years -- need not necessarily spell doom if profits are on a strong trajectory.

Unfortunately, this is not the case, as an unsettled and volatile fixed-income market is being accompanied by a less-than-stellar profit backdrop. Second-quarter 2013 earnings (excluding financials) are forecast to drop by about 1% while top-line sales increase by only 1.5%.

Second-half earnings are being projected at nearly 10% growth.

Similar to the ambitious housing projections for 2013-2014, the U.S. corporate profit outlook seems too optimistic as well.
At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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