Alcoa Inc (AA) Breaks Down before Earnings

Alcoa Inc. (AA) moved lower on Thursday as commodities across the board struggled and the overall market fell as jobs data lead many to disbelieve the 2nd quarter will represent a turnaround in the US economy. The stock fell 4.73% to break below an early lower for the past 30 days of $10 a share. The company is set to announce their earnings on July 8, Wednesday of this coming week.

Revenue and Earnings

Revenue and Earnings estimates for the company have been reduced over the past three months with 2nd quarter earnings now expected to be a loss of 34 cents. This represents a decline of 151% from the earnings of the same quarter a year ago. Revenue is also expected to show a decline with the current estimate at a reduction of 48% compared to last year’s 2nd quarter.

Beginning of Earnings Season

The company has missed it’s earnings estimates the past three quarters, missing by 2 cents in March. The Alcoa report represents the beginning of the 2nd quarter earnings season which should provide the markets with direction up or down going forward. If both Alcoa and Chevron (CVX) provide disappointing earnings this coming week, the markets could fall for the week giving investors a trade for the final 2 days.

Southwest (LUV) Flies into New York LaGuardia

Southwest Airlines begins to fly into New York this weekend as the company searches for business travelers to increase revenue in a field that it has not ventured in the past. Flying into crowded airports where turnaround times are slower and most travel is for business is something the company does not have much practice doing.

Stock Price and Earnings

The stock moved 5% higher today as the overall market jumped on the prospect of a better economic 2nd quarter than the 1st quarter in the US. But shares of Southwest have be beaten down in recent months from close to $9 a share 6 months ago to a little over $6.25 a share recently. Revenue is falling 9% for the current quarter compared to last year and earnings are also falling 50% for the quarter on a year to year comparison.

Price to Earnings

The forwarding looking price to earnings (P/E) ratio for LUV is currently 15.05 and with the earnings decreasing, it makes an assessment difficult. With rising gas prices though and the economy yet to recover makes the short term future for the airlines troubled. Analysts have reduced their expectations for the current quarter from 19 cents to 8 cents over the past three months. For the current year, similar decreases in earnings expectations show analysts disbelief in any turn around in the near term.

Microsoft (MSFT) Moves Higher on Bing Optimism?

Reading Goldman Sach’s new rating of Microsoft from the Buy status to the Conviction Buy status makes one wonder if Bing is really all that much different than Live. Live was the companies previous attempt to get search traffic away from Google, while Bing is the companies latest. Goldman feels a price target of $29 a share is realistic with the stock currently at $24.07 a share after a 2.5% increase today.

Expensive Price?

The stock has had a very nice run from near $17 a share to the current price over the past three months. At it’s current level, the price to earnings ratio is almost 14 with the company expected to earn 8.6% less this year than the prior year and 5.8% more next year. Thus making the stock expensive unless you strongly feel the income will improve before the final earnings numbers are released. Yet the majority of analysts have dropped their expectations for the current quarter and the year over the past 90 days.

Research in Motion (RIMM) Tops 1st Quarter Estimates

The maker of the most popular PDA for business, the Blackberry, continues to improve it’s market share in the consumer segment. The company reported earnings today beating first quarter estimates of 94 cents. The company earned $1.12 per share on $3.42 billion in revenue. The income number included a one time tax benefit but the company still beat by 4 cents even without the beneficial item.

Solar Stocks Offer Risk Not Growth

Solar ETFs moved 4-6% higher on Wednesday as Oil prices continued to climb making alternative energy more attractive. But not all solar stocks are worth holding, in fact many are too risky for most investors. The Claymore/MAC Global Solar Energy (TAN) moved 6.2% higher while the Market Vectors Solar Energy ETF (KWT) moved 4% higher. The Market Vectors Solar Energy ETF (KWT) tries to duplicate the Ardour Solar Energy index while the Claymore/MAC Global Solar Energy (TAN) holds a number of solar stocks including First Solar, Suntech and Trina Solar.

VistaPrint (VPRT) Looks Good on a Pullback

With the markets starting to break out of a sideways pattern picking up a good growth story on a pull back is a decent trade. VistaPrint Ltd. feel 6.30% today on weakness in the markets after the Dow Jones Industrial average reached a three month high yesterday. Technical indicators are showing the Nasdaq and the Russell 2000 in a rally formation. The Dow and the S&P 500 are currently in a hold position even after the recent breakout but could turn positive with additional days higher.

Dow Jones Industrial Finally Signals a Hold

The Dow Jones Industrial Average finally signaled a hold at the end of this week with all four major indexes now in limbo waiting for a move higher or lower. The charts look like tops with the Dow and the S&P 500 index already completing their top formations. The Nasdaq needs to fall below $1664 while the Russell 2000 can form a top formation with a break below $471.82.

Goldman Sachs Group (GS) - Increased Profit Estimates

Goldman Sachs is one of the few companies with increased profit estimates in the marketplace today. Over the past 90 days their current quarter profit estimates have increased from $1.92 a share to $2.44 a share, a 27% increase. Likewise the next quarter estimates and the year profit estimates have also moved higher with the analysts that cover the stock.

Short the Market, A little Ahead of the Move

With the markets topping out this week and breaking through resistance on two separate days during the past five trading days, I moved from a cash position to a 50% short position. This could possibly be a little ahead of the move downward as most indicators are still neutral to positive. The vehicle that I am using for the short position is the Proshares Ultrashort S&P 500 (SDS). This is the opposite ETF of the one I held a position in during the recent market rally, the Proshares Ultra S&P 500 (SSO).

Markets Pause After Recent Run

Taking a look at the S&P 500 chart today showed a 5 day top formation which was enough for me to close out my Ultra S&P 500 Proshares (SSO) positions that I had. Two positions were quite profitable near 20% and 15% with the third recently purchased position losing about 2.5%. When the S&P 500 broke below the recent low of 902, I felt it was time to sell. In addition, the NASDAQ has not performed well the last couple of days and the Bank Stress Test completion didn't provide a catalyst beyond Friday like I had hoped.