Playing The Earnings Game

If corporate profits are so weak, why are stock prices so high? Good question. A BUSINESS WEEK survey of 900 companies shows that third-quarter profits declined by an average of 4% from a year earlier, the worst showing since the recession of 1991. Yet the Dow Jones industrial average is up nearly 1000 points in a month and is close to 9000. Sure, the Fed has cut rates twice, and there's plenty of liquidity sloshing around. But aren't real profits supposed to support lofty prices?

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