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Market Woes Continue as Earnings Season Looms - Money Matters for 10/10/05 Don Bravo | 10/10/05
After last week's drubbing, traders picked up right where they left off on Monday, sending the major indices skidding to fresh lows in afternoon trade.
This comes as no surprise to the legions of market watchers who believe what they feel rather than what's being said in some quarters. While the market junk news merchants churn out rosy speculation positively spun, insiders are seeing continued erosion in everything from credit markets to corporate profits to real wages.
Two camps have emerged - one, which will swallow snake oil because they have been told it works, believes that the economy can continue to weather multiple storms of excessive credit, government borrowing, corporate scandal and bankruptcy, natural disasters and more. The other, perhaps more seasoned and skeptical group, are realists, believing that no bad deed goes unpunished by the market, and that it's only a matter of time before stocks go belly up in a wholesale manner.
For the past six months, the former group has had it's way, as the market paced along in a narrow range. Over the last week and one day, however, the tide seems to be turning to the realists.
Certainly, earnings for all companies are not going to be horrible, just enough of them to cause serious concern to the rest of the market. And looking forward, unless gas prices (both gasoline and natural gas) come under serious downward pressure, the US economy is going to sink straight into a recession within six months.
(Speaking of recession, a search for that one word returned "about 5,800" results on Google News, as compared to 7,000 last Monday. I can draw no serious conclusion at this time, except that when it comes to recessions, the mainstream press is usually the last to report or realize we're in one.)
The first company to report every quarter, Alcoa (AA), came out with a figure of .33/share after the bell today, comparing to .32 a year ago (other sources say last year's 3rd quarter was .34), or y-o-y growth of a shade over 3%, depending on whom you wish to believe. While that may cut it for GDP, it absolutely stinks for a major American blue chip corporation. Not reading very much into that figure, it should be pointed out that a year ago, Alcoa was pushing 35. It closed today at 22.66.
Also, make note that Alcoa's earnings were aided by .04 from the sale of railroad assets and that 2nd quarter earnings were 46 cents per share. If these results are hailed as good, or "satisfactory" by the media, we're in for a long, long, sad winter.
Our usual peek inside the market concludes once again with the new highs - new lows (see below). It doesn't take a genius to see the huge gap favoring the new lows.
Here's a guess: The markets will trend lower the next few weeks. Good luck.
BY THE NUMBERS
Dow Jones: -53.55; 10,238.76 close
NYSE Advancers: 940
Nasdaq Advancers: 1063
NYSE New Highs: 34
Nasdaq New Highs: 44
Gold: +0.30; 478.00 close
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