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Cashin: These Three Things Can Take Stocks Higher

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Art Cashin on the three keys to the market.

Art Cashin, is one of the most respected names on stocks. The Director of Floor Operations for UBS at the New York Stock Exchange sees three key factors affecting the market.

We’re now entering Wall Street’s third favorite time of the year, behind bonus season and Hamptons rental shopping. It’s another earnings season, the time when companies release their performance numbers for the quarter gone by. Expectations are realized, exceeded, or missed.

A little more than two dozen S&P 500 stocks have reported their earnings so far.

According to Thomson Reuters I/B/E/S, things are going as expected because two-thirds of companies are exceeding expectations this quarter. That roughly matches the proportion exceeding expectations in previous quarters.

In other words, we can expect most companies to exceed expectations. Follow that paradox?

Meanwhile, for those of you keeping stats, the growth rate for revenues is 1.5% but the growth rate for earnings is 2.9%. That means profit margins are growing faster than revenue. One of the ways that happens is through cutting costs.

“Ingenious management has found many ways to do more with less,” says Cashin. “US profit margins at all-time records.”

At some point, though, there’s only so much a company can do to improve its margins.

“Can it be sustained or will it revert to mean?” asks Cashin. “Since you can't cut much more, it's likely to revert to the mean.”

Cashin says there are two other major points driving this market now. To hear them, watch the video above.

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