Trading volume rebounded from yesterday’s holiday yawner as institutions moved off the sidelines and into the game. The Dow hit a new record high moving up 69 points to 22,830. IBD still has the markets in rally mode as we head into earnings reporting season.
Corporate earnings so far this year have come in at an impressive 11.7% growth rate but going into Q3 earnings season the estimates are so low that several investment banks including JP Morgan and Goldman Sachs indicate the actual numbers could be three times higher than current estimates. Current estimates call for sales to be up 4.7% and earnings to be up a measly 2.8%. This seems odd because if everyone knows the numbers are low then why are the numbers so low?
Kobe Steel in Japan is on the hot seat thanks to revelations that they falsified data on steel quality for mission critical parts in cars, trucks and aerospace applications. Boeing is reviewing the information as they work with Mitsubishi (who buys from Kobe) on parts. Toyota also is a big buyer of Kobe Steel and they are looking into this issue as well. This might explain why a couple of people I know who recently purchased Toyota pickups are complaining of driveline problems where the rear drive shafts are twisting. I wonder if these issues are related.