William Aylesworth, chief financial officer of Texas Instruments Inc, handed investors a sliver of good news as he forecast a third-quarter loss for the semiconductor maker.
The company's chips run two-thirds of the world's cellphones, and orders from phone makers increased in the second quarter, when the Dallas company had a loss of US$197 million. "We think the next stage will be growth," Aylesworth said. "It's hard to say when exactly that will begin."
Slumping profits dominate earnings reports after a year of slowdown in the US economy, and companies including Lucent Technologies Inc are firing thousands of workers. At the same time, reports from the likes of Cummins Inc, Microsoft Corp and General Motors Corp give investors and economists reason to believe the worst is past.
"The rebound is already under way," said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, a factory state.
Economists that were surveyed by Bloomberg News forecast economic growth will increase to an annual 2.9 percent rate in the final three months of the year, from the 0.7 percent pace in the second quarter that was the slowest in eight years.
Charles White, who manages US$2.75 billion in investments, ranks among the optimists. In April, the chief operating officer of Avatar Associates bought shares in Cummins, at the start of a quarter when profit at the biggest maker of diesel engines plunged 97 percent. While the truck market is "horrible," he said he isn't sorry.
"We're beginning to hear some early stories about the big-truck market starting to turn again," White said, also pointing out that Cummins makes electric generators. "Give us that much- anticipated turnaround in the economy, and this company is going to be able to print money." General Motors, the largest automaker, cleared excess inventories of cars and light trucks during the first six months of 2001, and that is helping keep production higher than first- quarter levels. The company had 61 days' worth of autos for sale at the end of June, within the 60 to 70 days that automakers usually regard as reasonable. DaimlerChrysler AG had 60 days' supply of cars at the start of the second half. Ford Motor Co had 62 days.
Production cutbacks contributed to a 45 percent decline in second-quarter profit at Lear Corp, the largest maker of automotive interiors and seats. Vice Chairman James Vandenberghe said the worst is probably over.
"If we look at where the industry is right now, sales have held up reasonably well," he said in a Bloomberg Television interview. "Granted, there are a lot of incentives that are being used to keep sales up, but the inventories are also in pretty good shape." Vandenberghe said he expects North American automakers to produce in the "high 15 million to low 16 million" vehicle range.
Consumers still hold the key to the economy: their spending accounts for two-thirds of gross domestic product. "The fabric of consumer confidence hasn't been breached," said Fed Chairman Alan Greenspan this week, a sign he was less worried than six months earlier.
Spending grew at a 2.1 percent annual rate in the second quarter, compared with a 4.8 percent increase in 2000. That's "probably closer to the kind of rate that is sustainable," said Jack Guynn, president of Atlanta's Fed Bank. Lower tax rates and borrowing costs are likely to sustain spending this year.
Home sales also haven't slowed, and home buyers tend to spend on furniture, appliances, carpeting, and linens. The rapid growth in home values also provides equity to consumers, Greenspan said.
Whirlpool Corp, the largest US home-appliance maker, sold more of its energy-efficient Calypso washers in the second quarter, limiting a decline in second-quarter profit.
"I expect the industry to start to turn around, maybe in the fourth quarter," said Peter Kovalski, an analyst at Evergreen Asset Management, which owns Whirlpool shares. "What we're seeing is a bottoming-out here." Viacom Inc, the third-largest media company, had a profit in the second quarter on higher sales at its cable networks.
Even Microsoft Corp, which last week said it would miss profit forecasts for the current quarter because of reduced demand for personal computers, expects the economy to turn a corner.
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