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The few that have gotten specific have found investors in a less than forgiving mood. On Wednesday, Scotts Miracle-Gro, a maker of lawn and garden products, cut its estimates for the year, and investors pushed its stock down 6.6 percent. On Friday, it was AAR Corp.'s turn to get slammed. The defense contractor said it might not earn as much as expected, and its stock plunged 7 percent. The backdrop is a quickly darkening economic picture. Last week, the government reported that shoppers spent less at stores for a second straight month in May, the first back-to-back decline in two years. That followed news that companies cut orders to factories for a second month in row and have pulled back on investment plans. Earlier in the month, the government said employers added just 69,000 jobs in May, the fewest in a year. Not surprisingly, economists at JPMorgan Chase, BNP Paribas, UBS and other banks have been cutting estimates for U.S. growth this year. Some of the bullishness by stock analysts rests on companies whose earnings are tied to rising commodity prices. But lately those prices have been moving in the opposite direction, and sharply. Copper, cotton, aluminum, platinum, you name it
-- all are down this year. The most widely watched of commodities, oil, has dropped 15 percent. Analysts expect earnings at energy companies like Chevron and Exxon Mobil to increase 17 percent in the last three months of the year versus a drop of nearly 7 percent this quarter. Earnings of materials companies like Alcoa, an aluminum maker, are somehow expected to rise 40 percent in the last three months. They're expected to drop nearly 11 percent this quarter.
David Kostin, a strategist at Goldman Sachs, thinks earnings for the S&P 500 will barely grow from here, eking out maybe a 3 percent gain for the year, less than half what the typical analyst projects. Using his figures, the S&P 500 is trading at 13.4 times earnings over the next 12 months, slightly above its 35-year average. Kostin expects the S&P 500 to end the year at 1,250, down 7 percent from Monday's close.
[Associated
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