Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

martedì 10 gennaio 2012

Market Comment - January 10

(Marco Bonelli) Could both, better or worse than expected earnings lead to better stock prices?

Today represents quite a classic example to demonstrate how information gets used and interpreted, which almost carries the stamp that "the market wants to go higher":


§  AA started the earnings season last night, slightly missed lowered earnings estimates (for obvious reasons) but beat revenues and provided a global demand and raw material forecast that was a bit more bullish than last quarter's - on back of hopes for an ongoing recovery of the US economy, it's a positive!

§  JNPR pre-announcing lower profits (again), along with several prominent European companies (Siemens and others) - reducing earnings estimates for Q4 has been an ongoing process for more than three months, therefore another profit-warning is not a surprise!

§  China's imports growth fell to a 2-year low in December - following concerns of a hard soft-landing in China for quite a while (which is also reflected in the minus 21.68 performance of the Shanghai Composite in 2011), expectations for another round of fiscal and monetary stimulation fly high, which is a positive!

§  Substantially better November manufacturing and industrial production in France probably offsets much weaker data from Sweden and Ireland, along with weaker retail sales from Denmark - investors got used to disappointing economic data so one positive data gets celebrated as a positive surprise that even raises hopes that future prospective might not be that bad; it's a positive!

Why didn't the market move higher yesterday? Earnings worries and sentiment are broader themes, so short-term speaking, the SPX simply had difficulties breaking out of its 4-day (!) trading-range - 1281.50, 1281.85, 1282 and 1283 were the highs from the prior four trading days! At the same time, the Nasdaq Composite traded at its highs from last Friday, as did the Russell 2000. Today the necessary data and interpretations are in place, enough for the contrarian rally to resume, the major indexes to break out of short-term resistance levels and to leave many investors already running after their 2012 performance.

Back to the initial question why the market could move higher no matter if Q4 earnings gets reported better or worse than expected:


§  Earnings beating estimates shows that expectations were too low, for the past quarter but in case of an ongoing economic recovery, probably also for the upcoming quarter or two. On the flip-side, earnings getting reported below already reduced expectations could easily trigger the perception that Q4 and/or Q1 might be the trough and corporate fundamentals will substantially improve towards 2H12, along with the economy (this perception only works if macro-economic data looks favorable, which it currently does, so far) - so no matter how you turn it, it's a positive!

This week is still light in term of earnings as the first big wave of corporate reports comes next week after another long weekend (Martin Luther King, Jr. Day on Monday, January 16), but the positive headlines out of the AA report along with hopes for a global economic recovery could easily lead to a late reaction of the positive labor data last week, which, under different circumstances, would have resulted in a strong rally. It is probably still worth accumulating positions in economy-sensitive sectors like industrial, technology and financial and play the contrarian rally as long as sentiment reflects concern, uncertainty, hesitance and disbelief.

Trade well.


(Marco Bonelli is the Managing Director of International for CL King & Associates in New York. The opinions expressed are his own)

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