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 24 luglio 2012

Market Comment - July 24

(Marco Bonelli) What's the definition of strong earnings?

A lot of market participants look at the current 67.5% earnings beats and declare Q2 earnings strong, definitely better than expected. Others are a bit concerned about the large number of lower guidance for Q3 but still see the past quarter as solid, given the environment. Quite a lot of comments point out the unusual number of revenue misses in the past quarter and see it as a troubling pre-cursor for future performance.

So is it incorrect to declare the Q2 earnings season so far as disappointing and negative? The 67.5% of companies that beat only beat by a small margin, despite sharply reduced estimates and still only manage to record -0.28% year-over-year earnings "growth"; almost 2/3 of the companies miss revenues estimates; the majority of companies guide Q3 and full-year numbers down (as a result, Q3 earnings growth estimates call for a mere 1.5% growth and even -1.5% ex financials) and in order to save some earnings, an increasing number of companies cut their capex spending as they obviously have no other costs to cut. This description clearly doesn't fit the definition "solid" or even "strong".

Nevertheless, yesterday's market and the rebound to recover half of the losses were mostly greeted with a kind of positive tone. "The volume was not there on two down-days"; "moving averages held"; "there is no panic at all" and of course the favorites like "the bad news is already baked in" and "valuations are extremely attractive" were presented. Some even see a short-term buying opportunity and consensus expectations seem to support a moderate trading range with little downside and little upside. So where is the famous negative sentiment? Some players even acknowledge that the market is "not concerned about a big pull-back". And when you run out of arguments because the situation in Spain and Greece further deteriorates, Ben Bernanke, the Fed and QE3 get presented immediately as a counter argument. Still, the Nasdaq lost a little more, the Dow Jones and SPX lost a little less than 1% and small/mid-caps continued their steep relative underperformance!

Indeed, all major averages except the Value Line Index and the Dow Jones Transportation Index (that broke all moving averages) held or recovered back above their 50day MA although the Nasdaq Composite, Russell 2000 and S&P 400 Mid-cap broke their Bollinger MA. So short-term players might try to rally the market and another possibly superb performance from AAPL after the close (particularly as opinions are quite divided and many analysts recently reduced estimates) might lend a helping hand.

No matter what happens today and tomorrow, the market direction over the next weeks will most likely be determined by the overall perception of the earnings picture, the macro picture and the decision the FOMC will take in its meeting next week.
Stay tuned and be careful!

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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