Profit Growth Stalls as European Slump Hampers Recovery

U.S. corporate profit growth stalled in the U.S. last quarter as companies from McDonald’s Corp. (MCD) to 3M Co. (MMM) saw gains in the world’s largest economy eroded by a slump in Europe, reports Bloomberg.

Earnings at Standard & Poor’s 500 Index companies, excluding financials, are seen gaining 0.6 percent in the first and the second quarter from a year earlier, according to analysts’ estimates compiled by Bloomberg, the slowest growth rate since 2009.

The European debt crisis and a slowdown in China are hurting S&P 500 companies, which derive about 40 percent of profits from abroad. At home, where the S&P 500 Index had its biggest first-quarter rally since 1998, consumer confidence is improving along with the job market — boosting demand for construction companies and retailers.

“While the U.S. economy is the cleanest shirt in the hamper at the moment, we’re only talking about an economy that’s motoring along at a subpar pace,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “The only way you’re going to see higher profitability is through faster growth.”

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