Corporate America continues to churn out record profits in the face of a weak economy, as the ongoing second-quarter earnings season demonstrates.
Despite solid earnings, stock exchange traded funds have been stuck in a range as investors look for clarity on the U.S. debt ceiling and the Eurozone crisis.
Earnings from U.S. blue chips such as McDonald’s (NYSE: MCD), General Electric (NYSE: GE) and Caterpillar (NYSE: CAT) are booming. Yet broad market ETFs such as SPDR S&P 500 (NYSEArca: SPY) have been lackluster although they remain in positive territory for 2011.
Companies are posting record profits after slimming down and cutting costs in response to the financial meltdown, but analysts want to see more from the top line: revenue. [S&P 500 Second Quarter Earnings on Track for Record]
Although Wall Street has shown signs of improvement, it’s a different story on Main Street. Unemployment is at 9.2%, and and job growth and wages are impaired, reports Paul Wiseman for the Associated Press.
“I’ve never seen labor markets this weak in my 35 years of research,” said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University, in the report.
Carl Van Horn, director of the Center for Workforce Development at Rutgers University, says the weak housing market and lack of demand for building materials is a big problem. Federal spending cuts could also weigh on the economy. [Range-Bound S&P 500 ETFs Fall to 50-Day Average.]
As the nation waits for approval on a package to raise the debt ceiling, the broad market appears stagnant and investors are ultimately waiting for resolution on this key issue before investing in equities.
“This is going to be a political issue. Both of the sides feel as if they have a great deal to lose, but we all feel as thought there is going to be a deal. Look at the market, the S&P is down nothing. There’s going to be a deal,” said Mike Shea, a managing partner and trader at Direct Access Partners LLC, Reuters reports.
SPDR S&P 500
Tisha Guerrero contributed to this article.