Transcripts

Wall Street Reaches for a Record With An Eye On The Federal Reserve

SUSIE GHARIB: A flat day of trading on Wall Street, as investors wait on the Federal Reserve`s meeting on Wednesday to decide interest-rate policy. Still, the last few weeks of trading have pushed the Dow within 150 points of its all- time closing high. Spurring that move has been a string of strong corporate earnings. Suzanne Pratt wraps up the first quarter financial numbers.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Wall Street expected good quarterly numbers from corporate America. What investors got instead was a hot first quarter earnings season. According to Thomson Financial, S&P 500 companies are on track to post a 14 percent jump in earnings growth. That`s well above the 10 percent gain that Wall Street predicted at the start of earnings season in early April. And it looks like the first quarter will be the 11th consecutive quarter of double digit earnings growth, the longest streak of its kind in more than 10 years.

ROBERT KEISER, SENIOR RESEARCH MANAGER, THOMSON FINANCIAL: The primary factor fueling earnings growth right now has to be the U.S. economy. It`s growing at close to a 5 percent clip, GDP year-over-year. Inflation is well-contained, core inflation around 2 percent. So the underlying fundamentals behind the U.S. economy right now are very strong and it`s been reflected in the earnings numbers.

PRATT: While the biggest profits came from the energy sector, the biggest earnings surprises came elsewhere. The basic materials sector delivered profits that were 15 percent above expectations. Financial services beat analysts` forecasts by 10 percent, while industrial and health care each exceeded estimates by 6 percent. No sector experienced flat or negative growth. Some market pros say the positive earnings news has helped underpin a healthy move in stock prices. Since reporting season officially began on April 10, the Dow has jumped nearly 500 points or 4 percent. Those gains have come in spite of surging oil prices and higher interest rates. Some market strategists say it`s about time investors take notice of corporate profits.

STEPHEN WOOD, PORTFOLIO STRATEGIST, RUSSELL INVESTMENT GROUP: I think there`s been a lot of headline risk. I think there`s been a lot of Federal Reserve risk and I think there`s been a lot of post-Enron risk. You know, can corporate numbers be believed? And I think now that we`re in a new regulatory environment, I think that there`s strong confidence that the economy is moving forward and that the global economy looks pretty healthy. I think now investors are beginning to focus on earnings.

PRATT: Earnings experts believe the double digit profit growth will continue throughout the rest of 2006. They also say the good numbers will be fairly broad-based, coming from a variety of sectors throughout corporate America. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.