Enis’s Macro Wrap – Horrific Earnings

by Enis October 23, 2012 6:48 am • Commentary

Our friend John Melloy, the producer of Fast Money, had a good, quick note out yesterday detailing just how disappointing the earnings season has been so far.  The most salient point for me from the note:

Of the 20 companies in the S&P 500 that have provided guidance for the fourth quarter during the current earnings reporting season, 18 have slashed their forecasts, according to Goldman Sachs.

That’s a 90 percent negative run rate that many investors and analysts have never seen before.

This morning, Dupont, one of the largest chemical companies in the world, badly missed earnings. These are not small misses.  They missed revenue by 10%!  Earnings was $0.32 vs. expected $0.47. At the end of the day, I am still of the belief that the business cycle has turned.  The central bankers are simply trying to pull the wool over everyone’s eyes.  In any case, we’re looking to be nimble as volatility in this market picks up.  Like I said last week though, I think the market top is in.

Markets overnight:

  • Asia was mixed overall, with Hong Kong closed.  China closed down 1%, the biggest mover.
  • Europe opened green, but immediately sold off, the first time we’ve seen that in a while.  It is now trading down 1%.
  • Once again, SPX futures especially weak overnight (-1%), breaking to new lows just now as it hit stops sitting at the breakout level of 1416.  We are now back below the April highs on this break.
  • Commodities quite weak, and dollar and Treasury bonds strong, in classic risk-off fashion.  Copper broke below its 200-day moving average, making post-QE3 lows.
  • UPS, 3M, UTX, and COH some of the names reporting before the open.  FB and NFLX report after the close.