S&P 500 Second Quarter Earnings Expected To Set Record High

Standard & Poor's, the independent financial research, ratings and indices leader, today reported a $16.04 second quarter 2004 operating estimate, a 24% increase from Q2 2003 earnings of $12.92. Sales are also expected to increase and margins to be maintained to slightly improved. "With 8.3% of the S&P 500's long term debt tied to the prime rate and therefore adjustable almost immediately after an interest rate increase, the cost of a full 1 point increase would reduce the S&P 500’s earnings by $0.22 per share annually, assuming a statutory 35% tax rate," said Howard Silverblatt, equity market analyst, Standard & Poor's. "Therefore, the rate increase should not have a significant short-term impact on earnings."

The twelve-month P/E for the S&P 500 is 19.4, as compared to the P/E from March 2000 of 27.8. The average from 1988 is 20.0. "With earnings-per-share also at a record high, and the market still off 26% from their March 2000 highs, P/E ratios are more reasonable," said Silverblatt. "Investors are paying much less for forward growth and prices are more in line with historical values."

The full year 2004 earnings projection is also expected to set a record, however not all sectors are expected to gain. According to Silverblatt, "Information Technology will be the largest gainer, but this will partially be due to a continuing recovery from negative earnings in 2001. Lagging performance is expected from the overall Telecommunications Services sector due to continued competition, however, even within Telecom there should be segments, such as wireless services, that will perform well."

S&P 500 & GICS SECTORS	Q2 2004 INCREASE OVER Q1 2003	2004 INCREASE OVER 2004
S&P 500	24.15%	20.67%
Consumer Discretionary	22.83%	29.17%
Consumer Staples	7.02%	4.34%
Energy	42.89%	23.58%
Financials	9.89%	15.12%
Health Care	40.74%	25.49%
Industrials	14.84%	20.65%
Information Technology	119.12%	57.98%
Materials	42.08%	55.00%
Telecommunication Services	-17.14%	-9.59%
Utilities	16.17%	-3.76%

Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 5,000 employees located in 20 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.