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Strong Earnings Expected to Keep Driving Stocks Higher

Thursday, 19 Apr 2007 | 9:42 AM ET

Richard Sparks, equity analyst at Schaeffer’s Investment Research, told CNBC’s “Squawk Box” that he expects positive earnings news will continue to drive the market higher.

“When we look at the expectations for earnings, we find that they’re actually quite low,” Schaeffer said Thursday. “At the beginning of the quarter, we expected 8.7% year-over-year earnings growth. That’s been ratcheted down by analysts and they’re barely expecting 3.5%. If we come in ahead of those estimates, as we have, I think we’re going to see the rally continue.”

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He said a healthy dose of skepticism has kept buying in check, making the market more controlled the rally more sustainable.

He likes financials and small-cap technology stocks.

“The financials are great,” Sparks said. “The banks have come in with very good earnings this quarter. The brokers are also an area where we see opportunities. The February pullback for brokers was significant, but they’ve bounced right back and if the market continues to new highs, the brokers are going to benefit from that.”

He said concerns about corporate spending with major companies such as IBM are justified, but he suggested investors take a look at Amkor Technology, a provider of semiconductor packaging and test services. He doesn’t own the stock.


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