11.10.2011

Earnings On Watch

11.10.2011

Thursday brought about a type of sea change to the markets. News about the European debt crisis, Italy and MF Global seemed to simmer down. After a dreadful sell off on Wednesday afternoon, equities rallied on Thursday. The Dow Jones Industrial Average closed up 112 points at 11,893 and the S&P 500 caught a 10 point gain to get back up to the 1239 level – well below the key line in the sand level of 1251.

The U.S. dollar dropped slightly as well which many thought would help boost commodities, particularly gold. Such was not the case as gold fell in tandem with the dollar.

But what some shrewd traders and market participants have noticed is the quality of earnings. Lately, there has been a wave of third quarter earnings reports coming out. Traders have been very aggressive on earnings numbers with multiple companies just missing Wall Street consensus. As a result, huge selloffs have begun in names like Green Mountain Coffee Roasters and Netflix.

One trader noted that fourth quarter earnings will really tell where equities and the economy are headed in the future. “If the growth can’t continue, a double dip recession could be very likely,” he noted.

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