Earnings Part Deux

by Larry Levin


Today was all about earnings again - part Deux if you like. The early numbers were mixed at best, and could be considered poor by many. When the analysts lower the estimates to easily attainable benchmarks, how couldn't they be beat? After the close, however, IBM knocked the cover off the ball!

Let's start with the morning's so-called good news. Many financial sites said something like this, "Stocks rallied on Wednesday, with the Dow industrials posting a 256-point advance, as upbeat results from technology bellwether Intel Corp. and financial giant J.P. Morgan Chase fueled the market higher." The interesting thing is that Intel lost 12% of its profits while JP Morgan’s profits plummeted 50%. I guess this is bullish because, after all, "it could have been worse."

Looking at a chart I see that JPM was trading at $42/share this time last year. Today, after posting a massive 50% profit loss, the stock closed higher than a year ago at $44.96 - up 6.7% on the "good" news. Wow, that's good work if you can get it, eh? And that reminds me of another company that posted a recent loss - GE. General Electric posted a 6% profit loss and its stock was greeted with its worst boot-stomping since the '87 crash. JPM's loses are 8 times worse, and its stock is greeted with cheer & praise. Again I say - that's good work if you can get it.

Coca-Cola offered "good" news that wasn't BS. It not only beat the Street's estimates, Coke posted a healthy 19% profit increase. For these great results, KO's stock closed up a measly 21-cents per share.

After the close another company offered good news that was not BS - IBM. Big Blue reported a first-quarter profit that rose 26% from a year ago as the technology giant recorded strong sales in its global services division. And with the US dollar nose-diving to never before seen levels, IBM will surely rack up more international profits in the future. During an after-hours conference call to discuss IBM's results, CFO Mark Loughridge said IBM was raising its 2008 earnings forecast to at least $8.50 a share, which would be an 18% increase over its 2007 results. This is truly positive data and Big Blue is being rewarded for it while I type this.

Like INTC and JPM, Wells Fargo reported an 11% drop in net profits today but its shares were rewarded by closing up 4.3%. Ummm, I guess "it could have been worse."

In other apparently insignificant news, new construction of U.S. houses plunged to the lowest level in 17-years according to today's data from the Commerce Department. Interest rates are inching higher as 30-year bonds have been crushed two-consecutive days. The US dollar is at new ALL TIME lows against the Euro. Crude oil closed above $115-barrel marking yet another record high and as long as the US dollar plummets, this will continue. Send thank you cards to the Federal Reserve attention: Helicopter Ben Bernanke. When gasoline at the pump is $4.50-gallon, which will probably happen some time this year, send him another thank you card.

And finally the Fed's Beige Book was terrible, so it was ignored. According to the collection of information from its 12 regional banks, consumer spending has fizzled out, labor-market conditions are worsening and manufacturing activity is treading water. Nine of the 12 districts said economic conditions were worse in mid-April than in the previous month. Three said that conditions had not changed much. Those aren't my words, but the Fed's.

Luckily, much like the rise in food and energy prices, the bad news in the Beige Book is just a mirage.

Real Time Trading Signals*for

Trade Date: 4/16/08

E-Mini S&P Trades*
(before fees and commissions):

1) PP sell @ 9:25am at 1352.00 = -1.00 & -1.50

2) OTF buy @ 10:40am at 1354.25 = b/e & +.75

3) FT buy @ 12:00pm at 1356.00 = +1.00 & -1.00

4) OTF sell @ 1:35pm at 1356.75 = b/e & -2.00

5) FT buy @ 2:00pm at 1359.50 = +2.50 (1 lot)

6) Algorithm trades (7)…combined total…+8.00

E-Mini Russell Trades*
(before fees and commissions):

1) Buy @ 10:23am at 707.8 = +.5 (1 lot)

2) Buy @ 11:43am at 708.7 = +.4 & +.5

3) Sell @ 1:15pm at 706.8 = -.9 & -.9...-$40


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