A market that has seen its focus be completely on happenings in Europe has suddenly turned its attention to a new subject. Earnings are the new game in town. The market has postponed its urgency towards the problems in Europe in exchange for clarity on how Europe, and our own problems here at home, are affecting earnings for our biggest and most heavily weighted companies. In the end, it’s always about earnings. The stock market moves up and down on happenings globally based on how those happenings will affect every companies bottom line. The problems in Europe are real, and has caused massive anxiety to investors about what we will be seeing for our most beloved stocks. I can’t blame anyone for their anxiety for fundamentally things have really deteriorated. The bar has been set much lower this earnings season due to that reality, and many stocks have taken gigantic hits to their stock prices based on the thinking that things have really gone sour globally.
As the reports come in we are seeing numbers that are down but not as bad as one might have imagined. Many companies are warning, such as Intel Corporation (INTC) did last night, yet the stocks are going higher due to the huge hit in their stock price, and much of the miss being priced in over the past few months. We saw International Business Machines Corp. (IBM) come in tonight and miss on revenues, but be rewarded anyway with higher prices based on their not warning on the coming year. F5 Networks, Inc. (FFIV) was so bad it couldn’t help but go lower. On the other hand, not so great reports, but far from bad such as eBay Inc. (EBAY) and QUALCOMM Incorporated (QCOM) and being handsomely rewarded after hours.
Look at the charts of EBAY, IBM and QCOM coming into their numbers tonight. The charts hit very hard, especially IBM and QCOM. When enough carnage has been seen by the Street on a price basis, it becomes more of a call-off-the-dogs situation. The damage done, and because they’re not saying the future is looking all that bad, they’re moving up and moving up quite a bit in some cases. So far it hasn’t been bad earnings season, but it’s far from over. There will be some very bad nights, and hopefully, some very good ones as well to average things out and give the market some hope.
The worst performing sector within the world of technology for quite some time now has been those nasty semiconductor sector. Last night we heard from Intel, and to be blunt, it wasn’t a very good report. However, as I mentioned earlier in this report, it had already been torn apart, and it really wasn’t all that bad a report for the future. Not good, but not bad. At first the stock went lower, but then found a bid as it should, and blasted higher for the day. It allowed for a big gap up in the semiconductor sector that may be a bottoming-type gap up for the medium- to longer-term.
It’s hard to say for sure, but it could be, and will need to be watched very closely. It is bullish to see a gap up rather than just a slow move up from flat when you’ve been in such an intense longer-term down trend. It brings hope, but by no means, does it mean the worst is over. Hope is all for now. We’ll need to see a lot more evidence over time to confirm it. If the semis can get rocking, it will give the Nasdaq 100 a real chance at some breaking through the wall of resistance at 3000. Time will tell. There are still enough global headaches to prevent that from happening for a very long time.
Bottom line is that for now the focus is here in the United States with an eye towards Europe more in the background now. Watching guidance from each and every company will be the focus, but the problems from abroad have not disappeared, although it seems the market wants to make them do so without really finding a proper cure. Let the Fed deal with that type of attitude. That won’t work. However, we play what the market tells us to. For now things aren’t bad, but they’re far from great. If you want great, then you need to see the Nasdaq 100 remove 3000. It’s a wall of resistance for sure.
A day at a time as always.
Peace,
Jack
