Stocks could fall as Friday’s Employment Situation report disappointed Wall Street BIG-time. Economic gurus were expecting 201,000 new jobs and their models were of by only 81,000, or 40%. That kind of makes the weatherman look good even when he/she says it’s going to rain on a perfectly sunny day.
Top Equity News wouldn’t be surprised to see the NASDAQ, Dow, and S&P 500 fall to their 50-day moving averages. Roughly the next level of support is at 2980 for the NASDAQ, 12.976 for the Dow, and 1370 for the S&P before today’s close.
So now the debate will officially begin, will the Fed launch QE3, another twist, or some other tricky monetary policy to boost “asset prices”? TEN says Wall Street better be careful for what they wish for. Adding gas to the already simmering inflation fire, and food and gas prices could leave the average consumer with nothing left to buy iPads.
Or, the consumer could break out the credit card as confidence is starting to rise. Hopefully, it’s not false confidence that leaves the average Joe and Jane deeper underwater than pre-2008 crisis levels.
Earnings will be the deciding factor. As usual, Alcoa will cut the ribbon with their earnings on Tuesday. There are some ominous signs that the aluminum company will fare worse than expected. Then Google Inc. (GOOG) steps the plate on Thursday. While the tech and NASDAQ leader is likely to top expectations of $9.64 per share, they have missed two of the last four quarters and in 2011’s first quarter.
Either way for AA or GOOG, investors are probably going to me more focused on future earnings guidance than first quarter profits. Analysts believe 2012’s first quarter earnings will be flat relative to 2011’s, and that six of 10 sectors will actually produce smaller profits than the same period last year.
It has been said many time that earnings are the mother’s milk of profits. It’s hard to imaging falling earnings and a rising stock market without the aid robust forward guidance.
It’s TEN’s view that at investors should start to initiate some defensive measures. A few ideas include covered calls against some of your profitable stocks, and maybe even putting a few dollars in an inverse ETF like ProShares Short S&P500 (SH). SH essentially deliver the opposite performance of the S&P 500. If the index drops 5% in the next few weeks, SH should gain roughly 5%.
This week has the potential to get ugly as there is no significant news scheduled and only a relatively small amount of companies reporting profits. Minus stellar earnings, there is very little to stand in the way of momentum.
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