Profit warnings are running at twice the rate they did in the first quarter. Despite what the pundits say, there's still a lot of bad news to come. The debate now raging on Wall Street is how the bad earnings news will affect the stock market in the months ahead. The torrent of cautionary statements didn't prevent the Nasdaq composite from scoring its fourth-best monthly gain ever in April. Bulls say lousy earnings and a steady diet of downward earnings revisions in recent months is already reflected in stock prices that are well off their highs.
More ugly news is unlikely to drag prices lower.
These optimists are already positioning their portfolios for better times. They're betting that stocks will head higher months before earnings and the economy turn around, as they have in the past. Four interest rate cuts so far this year and more on the way from the Federal Reserve will provide the needed stimulus to boost consumer and business spending, they say. Bears say the stock market won't be able to withstand the torrent of negative confessions from Corporate America. These skeptics question whether companies that issue optimistic forecasts are basing them on real signs of improvement or on blind optimism.