You’re Not Imagining It--1st-Quarter Earnings Look Great so Far

No mystery what’s driving the latest leg of the bull market, says one of Wall Street’s biggest optimists.

First-quarter corporate earnings reports “have been absolutely stunning,” Goldman, Sachs & Co. investment strategist Abby Joseph Cohen said at a conference in Washington on Wednesday.

With about 79% of the companies in the blue-chip Standard & Poor’s 500 index having reported first-quarter results, the average gain in earnings versus the year-ago quarter is 9.6%, according to earnings tracker First Call.

At the start of the quarter, analysts had expected growth of 6.7%.

Thank the U.S. consumer, whose spending on everything from cars to cellular telephones to cosmetics has remained robust.

Cohen had predicted that the Dow Jones industrial average would reach 10,300 by the end of the year. With the Dow already at 10,845.45 now--up 18.1% year-to-date--Cohen said she will revise her year-end target after most of the remaining S&P; 500 companies have reported earnings.

Profit optimism is blooming among analysts, amid growing talk about a pickup in Asian economies as the year wears on.

According to First Call, analysts expect S&P; 500 earnings to rise 13.2% in the second quarter, 24% in the third quarter and 21.9% in the fourth.

If they’re right, S&P; profits would surge an eye-popping 17.3% for the year, far more than the average annual gain of 7% during the last 30 years.

Skeptics warn that earnings forecasts may not come through. Japan’s nascent recovery could stall, and some of Europe’s biggest economies are teetering on the edge of recession.

Nonetheless, the first-quarter results are highly encouraging, analysts crow.

“Overall the strength is broad and impressive,” said Joe Cooper, a senior research analyst at First Call in Boston. “With more companies beating expectations--and by a large margin--analysts are raising their estimates and are gaining confidence that the trouble spots won’t stand in the way” of continuing growth.