Investors rethink stock valuations as China, growth weigh on prospects

Thu Jul 23, 2015 1:11am EDT
 
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By David Randall and Rodrigo Campos

NEW YORK (Reuters) - Apple Inc's (AAPL.O: Quote) disappointing earnings matter to more than just the investors who hold its shares.

With the iPhone maker among just a handful of companies accounting for more than half of the U.S. stock market's gains this year, some fund managers and analysts are concerned that the long bull market, which has pushed the S&P 500 index .SPX up almost 50 percent in less than three years, is starting to wane.

They worry, among other things, that the stock market crash in China will cut into global growth; that a stronger dollar will erode into overseas profits for U.S. companies; and that companies are trading at rich valuations after four years in which the S&P 500 hasn't experienced a 10 percent decline - known as a correction on Wall Street.

Now, with lackluster earnings results in tech companies, one of the market's few bright spots this year, investors are concerned that a decline in shares of Apple, Microsoft Corp (MSFT.O: Quote), and IBM Corp (IBM.N: Quote) might foretell a wider pullback.

"The market is flashing a yellow light right now," said Bob Doll, a senior portfolio manager at Nuveen Asset Management.

NARROWING MARKET

The S&P 500 is currently less than a percentage point away from an all-time closing record. But market internals - indicators professionals look at to determine the health of the market - look weak.   Continued...

 
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, July 21, 2015. REUTERS/Lucas Jackson