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Quiet Before the Storm of Earnings - Ahead of Wall Street

Tuesday, April 7, 2015

(This is Mark Vickery taking over for Sheraz Mian, who is off this week.)

Tomorrow after the bell, giant U.S. aluminum company Alcoa ( AA ) reports its Q1 earnings results, "unofficially" kicking off the next deluge of earnings reports from banks, tech firms, then every other publicly traded company under the sun. We are expected to embark on an "earnings recession" beginning with calendar Q1, where earnings growth is anticipated to be in negative territory for the next 2 quarters.

For Alcoa itself, the Zacks Rank #3 (Hold) company has a Zacks ESP of +8 percent; the Most Accurate estimate of 27 cents is ahead of the overall consensus of 25 cents. The average quarterly positive beat over the past 4 quarters - and they have beaten estimates in each of them - is over 48 percent, and Alcoa's Zacks Industry ranking is in the top 23 percent of companies.

Earnings season is the one time per year - OK, 4 times - when investors stop obsessing about what the Fed's going to do later this year and face the realities of companies' quarterly reports now. Because earnings estimates have fallen so precipitously, we are now in a very low-bar-of-expectations mode.

What I'm suggesting is that positive upside from bank investing, from enterprise spending in tech, consumer spending in retail, etc. might stoke markets for the next few weeks. Even tepid results may result in positive sentiment based on how low expectations are presently.

In company-specific news, the country of Canada is selling its remaining stake in General Motors ( GM ) - recall during the auto industry bailout a few years ago Canada was an important investor in GM - to Goldman Sachs ( GS ) for an undisclosed amount. Auto sales have improved notably, and perhaps Goldman assumes this will continue based on continued pent-up demand.

Mark Vickery

Senior Editor

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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