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Markets Move Higher Looking Forward to Earnings Season

Jul 12 2010

Markets Move Higher Looking Forward to Earnings Season

According to an article today by the NY Times, the American recovery is in full affect for US corporations and the upcoming earnings season should display some of this good news throughout business sectors. Profits among businesses in America will be some of the best numbers ever seen according to the news source. This positive feeling about corporate profits has already has brought the major indexes out of a downward movement and into a short-term rally. The Dow Jones Industrial Average has bounced off a nine month low of 9595 up to 10225 over the past week.

Of course American’s themselves are awaiting the jobs recovery which is not happening. If employment lags the recovery, this is one long period of lagging for many unemployed. Bell weathers such as  Alcoa (AA), JP Morgan Chase, Intel (INTC) and Google (GOOG) will start off earning season today and could provide support for a further rally into the third and fourth week of the earnings season. If you have followed the markets for any period of time, you have seen the pre-earnings sell off, followed by the start of earnings rally, followed by a post-earnings sell off. Be ready to ride the waves as we continue the cycle.

The overall S&P 500 is expected to be 25 to 30 percent stronger this earnings season then it was in the same period a year ago. Investors want the strong reports but also need a clear sign of the next couple of quarters to maintain their enthusiasm for an economy and that has faced global currency issues and soft housing numbers over the past few weeks.

Update: Alcoa (AA) came in with a 22% increase in sales for the quarter while aluminum prices fell. Earnings were 13 cents a share compared to a loss of 47 cents in the same quarter a year ago. Analyst were looking for 19% revenue growth and 12 cents a share profit. The stock fell less than 1% on  the day. Alcoa is not a trade that we want to be in unless you are looking for a short decline in price when the earnings season winds down.

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