EmailFutures suggest a down open of about 10 points in the S&P 500 index. There isn't much news today to account for negative sentiment. The weakness is due to understandable concern over next week's earnings reports.
The few earnings reports there have been so far have been overwhelmingly lousy. Normally, the handful of small companies that report in the first week along with Alcoa don't matter much. They also normally, however, produce reports above expectations. This quarter that has not been the case.
As of this writing, 19 companies have reported earnings so far this week. Twelve have reported earnings below expectations. Of the seven that matched or beat earnings forecasts, three reported revenues below expectations. That leaves four with seemingly good reports, and of those, Alcoa warned about future earnings and the stock is lower.
The bottom line is that of 19 companies that have reported earnings so far, only three have produced fundamentally good earnings reports that have boosted their stock price.
It is important to again stress that this is limited data, and includes some very small companies, but the early trends portend very badly for the upcoming reports. Of the reasonably large companies, Alcoa, Marriott, and Shaw Group have all seen their stock prices take a hit. Supervalu suspended their dividend and the stock has plunged pre-market (revised from earlier update since dividend announcement).
The JP Morgan Chase and Wells Fargo reports tomorrow morning, and the market reactions, will be telling as to how traders might react to the deluge of earnings next week.
New claims for unemployment for the week ended July 7 fell to 350,000 from a revised 376,000 the prior week. This is good news as claims had been running over 380,000 for the past couple of months, but the Department of Labor attributed the drop to a seasonal anomaly associated with auto factories. It didn't give S&P futures much of a boost.
European stock exchange indices are broadly lower, and the euro is down to 1.2183. Gold, oil, and other commodities are off sharply. Market participants are hoping that the Fed rides to the rescue with another round of quantitative easing, but hopes aren't enough this morning to offset the early warnings signs for this earnings season.
Founder and Chairman, Briefing.com
