Canaccord Genuity Morning Coffee on S&P 500: Looking for Something Else to Worry About?

June 19, 2012 10:34 AM EDT
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Canaccord Genuity Morning Coffee on S&P 500: Looking for something else to worry about?

Who's Webb Simpson, and what relation does he have with the Bird-Man? If you gave us the next news item out of Europe, we are not sure we would be able to give a confident opinion on which way the market should trade on it. For now, it looks like the Greek election has produced a moderate “risk-on” trade as fear of a disorderly withdrawal appears unlikely for the time being. The Greek election angst just highlights the many headwinds facing investors. These include: the European Debt Crisis, the “Fiscal Cliff,” the slowdown in China, weaker economic data, the slowing rate of change in EPS, the coming election, the geopolitical risk, and of course the level of debt. All of these factors are true and just kind of roll off your tongue. It is times like this when we have to ask two very important questions: 1) are the fundamental drivers in place that indicate positive economic and EPS growth ahead; and 2) is the intermediate term bull market trend of higher lows and higher highs in place? Canaccord Genuity Chief U.S. Equity Strategist Tony Dwyer believes the short answer to both is “yes,” despite periods when it feels like “no.” Dwyer's 2012 S&P 500 target remains 1,575, based on 15x $105 in operating EPS. The market will look to FedEx (NYSE: FDX) today to provide a reading on U.S. growth. FDX's Q4 consensus expectations are for revenue of $11.22 billion, EPS of $1.95 vs. guidance for $1.75-2.00. FDX’s U.S. shipment volume is a good indicator of industrial production. Another barometer of U.S. growth, Paychex (Nasdaq: PAYX), will report Q4 results on June 28. PAYX's Q4 consensus expectations are for revenue of $556.9 million and EPS of $0.34. The average number of checks Paychex issues per client is an indicator of how well the economy is doing. The U.S. Commerce Department will announce its advance estimate for Q2 GDP on July 27.

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