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 21 febbraio 2012

Market Comment - February 21

(Marco Bonelli) How will the market handle minus earnings growth?

According to Bloomberg data, Q1 earnings growth for the S&P500 is estimated to be -0.4% (this number was north of 5% just three months ago). With earnings growth in Q2 is currently estimated at +1.3% we are roughly talking flat earnings for the first half of this year and yearly comparisons are tough up until Q3.


This is clearly a change in fundamentals and not really a matter of low expectations. Over the last three years, investors got spoiled by mid- to high teens earnings growth, which dropped to around 5.3% in Q4 and now flat in the first six months of 2012. In a flat earnings growth environment, each percent price appreciation in the SPX makes it one percent more expensive, 8.24% year-to-date performance and the SPX is 8.24% more expensive than eight weeks ago, so the valuation argument is relative and not too valuable in an environment as estimates point to. How about the forward-looking function of the stock-market? The current expectation of a better second half and a great 2013 gets eroded by the trend of revisions; Q4, Q1 and Q2 earnings estimates got sharply reduced to the downside in the past months, Q3 and the full year reluctantly follow!

Talking earnings, it is retailer's week, HD and M already beat fiscal Q4 estimates, SKS and SHOO came in slightly better, RSH in line and the big elephant WMT missed. Tonight, BRCD, INTU and DELL deliver a bit more data for the technology sector, which has shown the best earnings picture in Q4 among all industries so far. Having mentioned that, the technology sector and the Nasdaq index showed some signs of profit taking during the last trading days (only to get reversed to the upside the next day), most recently after a blow-out quarter from AMAT last week, which raises the question how much good news is already anticipated in the 13.4% year-to-date performance and how long speculators hang in if some negative headlines show up.

With a very light calendar for economic news this week, investors are dependent on global developments, ranging from a discussed-to death bail-out package for Greece (that famously kicks the can down the road, but only one block!), lower deposit requirements for Chinese banks (which will miraculously lead to stronger GDP growth, at least on the papers of the central-planning committee!) and energy prices going through the roof thanks to heightened tension with Iran.

The highly publicized Dow Jones 13000 and SPX 1363.61 (closing high from May last year) is within close reach, nevertheless, the same discussion already came up on Friday and the two indexes closed below these crucial levels, let's see where the averages close today while the Dow Jones Transportation Index continues its two-steps back (down)/ one-step forward (up) approach!


P.S. Starting today we will publish a Focus-List Portfolio which will be actively managed throughout the year and we will update you on any changes. The portfolio and any changes will be sent in a separate mail. So far this portfolio has a 17% year-to-date performance.


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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