Hewlett-Packard raised its market outlook last night, with a confident CEO Mark Hurd saying “we feel well positioned for 2010.” Meanwhile, Wal-Mart’s Chief Executive Mike Duke said in the company press release that, “sales will be more challenging in the first quarter.”
The two are dividing the Dow Jones Industrial Average Thursday in a trade that could last the whole year: an overdue rebound in corporate spending amid lackluster consumer spending due to tight credit and joblessness.
After surviving the worst financial crisis since the Depression by cutting costs to the bone, many companies are now cash rich and in need of upgrading their PCs, excavators, offshore oil drills, medical imaging equipment. They also now have the cash to purchase competitors and pay dividends.
“The corporate funding ‘gap’ — the difference between cash flow and capital expenditures – suggests that nonfinancial corporations have a substantial ability to spend on everything from cap-ex to dividends to M&A,” wrote Jason Trennert, Chief Investment Strategist for Strategas Research. Trennert, late of ISI Group before starting his own shop because of his successful track record, shows cash at non-financial companies making up 5.4 percent of total assets, the highest since at least 1959.
Either those in the corner office are the most frightened since the start of the Cold War or they are going to start deploying some of this cash in some form.
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