Intel, by the way, has had investor-friendly earnings announcements for the past several quarters now. In Q3 2009, Intel beat “even the most optimistic expectations.” They also had a 33% upside surprise in Dec 2009 and 13% upside surprise in March 2010. In June 2010, they had their biggest quarterly profit in a decade, earning 51 cents a share, 18% above expectations. Beating the street expectations is what they do and are supposed to do. We expect tech to lead early on in a recovery cycle. However, as noted above, we are going to have to learn to love a slow recovery, and admit to ourselves there are significant headwinds for the consumer and small businesses. Moreover, the technical damage off the April 26 high remains significant headwinds for investors as well. In fact, the quarterly trend on the SP500, as defined by the red quarterly average at 1110, is bearishly sloping into the 2009 yr close at 1111 and the 50% retrace to the year high at 1104-1105 this week. Overnight, the trade could push into 1104-1111, but we openly wonder about its “legs” near term when the June retail sales is reported this Wednesday morning. June retail sales carry downside risks to expectations.
Let’s not forget Monday night’s observation that there has been a “central tendency” for the SP500 to peak on the day of Apples earnings – See the peaks on Tues Oct 20 and Tues Jan 19 (in chart above), and note that Wed Jan 20 took out the low of Tues Jan 19 just as Wed Oct 21 took out Tues Oct 20 low on the chart above. There is no reason to expect that that central tendency won’t repeat in Q2 2010 on July 20 and July 21…..Stay tuned for the rest of the story as it unfolds….
It is also worth noting that the small business optimism index peaked in May at 92 and plunged to 89 in June.
Details of the small biz index indicate that GDP growth will slow in the second half of 2010. for that very reason, Bernanke is considering reopening and expanding the prior role of the TASF facility to provide small businesses with access to credit. From Moody’s:
The urgency Fed officials have conveyed regarding meeting the credit needs of small businesses is justified, because scarce credit is slowing the recovery and keeping the unemployment rate stuck near 10%. While improving the availability of credit will help, demand for loans needs to improve, and this is contingent upon stronger sales. The details of the June survey show that the lack of sales is repeatedly among the biggest problems facing small businesses.
And this from the National Federation of Independent Business’s chief economist, William Dunkelberg following today’s NFIB survey:
The U.S. economy faces hurricane force headwinds and the government is at the center of the storm, making an economic recovery very difficult. The Index has been below 93 every month since January 2008 (30 months), and below 90 for 23 of those months, all readings typical of a weak or recession-mired economy. Seventy percent of the decline this month resulted from deterioration in the outlook for business conditions and expected real sales gains. Owners have no confidence that economic policies will fix the economy.
The bottom line is this: What Intel is seeing and what the other half of America is seeing as represented by small businesses are two entirely different things. The burden of proof as to whether this recovery has any real “legs” or not is on Intel. Small businesses, and the stock market, both say this recovery has some serious freaking headwinds dead ahead. Without some new miracle stimulus, what is an investor to think?
