S&P 500 Poised to Close at Record High, Despite Anemic Growth

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The S&P 500 has passed its former closing high of 1593.37, we'll see if it closes above that level.

Regardless: we are closing out April with what looks like another gain, the sixth month is a row for the S&P 500, (10 of last 11 months), last time that happened was in August 2009, when there was a seven-month streak (March 2009 to September 2009).

How to explain this? It still baffles and infuriates traders, considering the anemic growth we are seeing. How to explain the bizarre outperformance of stocks this quarter:

Major Asset Classes This Year

We all know that central banks are backstopping the world, and there is nowhere else to put money.

But growth has been anemic...with top line on either side of flat for most large, global industrials. You can see this in the comments from the big multi-industry companies. Eaton (ETN) CEO Alexander Cutler said this morning that "2013 is a year in which our results will depend more on our execution than on global growth," In other words, cost cutting is still the primary driver of earnings growth.

Almost all the big multi-industry companies reporting Roper Industries (ROP), Ingersoll-Rand (IR), United Technologies (UTX), Rockwell Automation (ROK) and others have had the following characteristics:

  1. Beat on bottom line (earnings)
  2. Miss on top line (revenues)
  3. Affirm 2013 guidance

For most companies, the big problem is Europe, where revenues have been far below expectations. Chrysler, this morning, cited a decline in international shipments year-over-year due to "continued weakness in Europe."

This has been a big problem for China as well, as exports from China to Europe have slowed dramatically. So a bottom in Europe is critical for revenue growth in the second half of the year.

The implication, of course, is that there will be a broader recovery in the second half of the year, which is one reason industrials have held up so well.

One problem that many of these companies are having, besides lack of demand growth, is that customers are waiting longer before they replace products....this is especially a problem with companies that do heating, ventilation, and air condition. For example....can the air conditioning hold out for another year? A lot of customers think it can.

By CNBC's Bob Pisani

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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