Yay – Greece is solved (again)!

Certainly this has to (again) be the catalyst that (again) gets us over 11,000 this morning.  Perhaps if this doesn’t do the trick the Fed can come out with a statement that they will be leaving monetary policy at FREE for another 6 months (again) or perhaps Obama can say he thinks we should put more Americans to work (again) or perhaps some of the Gang of 12 analysts can come out with even bigger earnings estimates (again). 

So many great ways to get us over 11,000 and it’s not even technical resistance – just psychological – so what’s the problem? 

In last year’s fourth quarter, companies in the S&P 500 posted 17% profit gains overall, Thomson says. That excludes financial companies, whose gains were skewed that quarter because many had posted losses or tiny profits a year earlier. For the quarter that just ended, analysts are forecasting 27% gains, again excluding financial companies. Including financial companies, the forecast is 37%.  “Earnings expectations are high enough to make it just too hard for a lot of companies to live up to them,” worries Justin Walters of Bespoke.  “We believe the market is more likely to struggle early on in earnings season than make a big move higher,” Mr. Walters wrote to clients last week.

Goldman Sachs noted in their Global Markets Daily that America’s huge Q4 GDP growth was heavily influenced by an U.S.-wide inventory re-stock from overly defensive levels, which may lead to a global growth slow-down as inventories level out.  Goldman’s April 6th note said:

Meanwhile, the momentum in the advanced economies was very strong in March as PMIs generally surprised on the upside. However, production in the advanced economies has been playing catch-up with the inventory cycle, as we continue to point out. This driver is temporary, and as mentioned above, the underlying data show that this cycle is coming closer to an end. The jump up in PMIs this month coincided with a large jump up in inventory indices, particularly in the US. As the inventory pendulum begins to swing the other way, industrial momentum may begin to slow.

Our Global Leading Indicator (GLI), released last weak, also confirms this story. While the headline measure improved, pointing to a solid industrial picture, the components generally show that momentum has been slowing. The PMIs are telling us a similar story.

IN PROGRESS