DAVID GREENE, HOST:
OK. From understanding language, let's try to understand one development in the economy. Corporate revenues have been lackluster. But despite that, stock prices keep going up. This might have something to do with what the Federal Reserve has been up to. Hoping to get money into the economy and stimulate growth, the Fed has been aggressively buying bonds. And Fed officials said, after their two-day meeting ended yesterday, that they could even accelerate the bond purchases if necessary.
Here's NPR's Jim Zarroli.
JIM ZARROLI, BYLINE: This is the time of year when corporations report how they did during the first three months of the year. And the picture so far has been mixed. John Butters is senior research analyst at Factset.
JOHN BUTTERS: The real surprise this earnings season has been on the revenue side. Only 43 percent of companies have beat revenue estimates.
ZARROLI: Butters says a majority of big companies are telling investors that their revenues were lower than expected last quarter - companies like Alcoa, Procter and Gamble, Microsoft and Caterpillar. Butters says these companies often are doing OK in the United States but they're seeing business drop off in other places - especially in Europe.
BUTTERS: Although that shouldn't be a surprise at this point, we did see a number of companies talking about the continuing weakness there. GE was one example where they saw conditions were actually worse than they had expected.
ZARROLI: Technology companies like Apple, which make a lot of their money overseas, are really feeling the impact of the global slowdown. So are companies like Goodyear, which says it's been hurt by a drop in tire sales. And yet, paradoxically, a lot of these companies are often earning bigger profits than they expected, because they've become so good at cutting costs.
Dow Chemical, for instance, says its net sales fell compared to the same time last year, but its overall profits rose. Here was Chief Financial Officer Bill Weideman talking to investors last week.
BILL WEIDEMAN: In total, we have already shut down 17 sites and the remainder progressing according to schedule. In addition, our workforce reduction targets are progressing ahead of schedule.
ZARROLI: Just how long companies can cut their way to higher profits is unclear. U.S. companies are facing some headwinds, domestically, such as the automatic federal budget cuts that took effect on March 1st. In its statement yesterday, the Fed said fiscal policy is restraining economic growth. Alec Young is global equity strategist at S&P Capital IQ.
ALEC YOUNG: The sequester is starting to bite. A lot of the impacts were delayed until, you know, late March and they're starting to kick in now.
ZARROLI: And yet, the stock market has been hitting new highs this year and Young says S&P Capital expects it to keep doing so. Most economists think growth will begin to pick up somewhat during the second half of the year. Young also notes that the Fed and other central banks have been pouring money into the economy in an effort to stimulate growth. And he says that's causing a lot of money to flow into the stock market.
YOUNG: What the Fed is doing with their aggressive bond buying program is depressing interest rates, depressing the yields that savers and investors can earn in bonds and other alternatives, and sort of forcing them into the stock market.
ZARROLI: U.S. companies are feeling the impact of the slowdown in Europe and to some extent in emerging markets like China. Normally, that would make their stock a lot less attractive. But as long as the Fed is working so hard to keep interest rates so low, investors who are looking for a place to put their money don't have a lot of other options.
Jim Zarroli, NPR News, New York.
(SOUNDBITE OF MUSIC)
GREENE: This is MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.