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A Bad Taste

July 9, 2012 – 5:03 pm

Alcoa will kick off the earnings season after hours tonight with expectations pretty low. A recession in Europe and a slowdown in China has pushed down expectations for all commodity driven corporate earnings and their stock prices.

Later in the week we will be getting GDP numbers from China and with their most recent reduction of interest rates coming on the heels (within a month) of another reduction it certainly suggests weakness in their growth numbers. Europe being one of their primary export destinations does not help as that part of the world slips deeper into recession.

Add in a little uncertainly about our fiscal cliff and you have a recipe for a bitter tasting summer for equities. Certainly there will be pleasant earnings surprises and with expectations fairly low the stock market may have swallowed some of the bitter pill but then again that bad taste in the market’s mouth is going to linger unless something happens to wash it down.

Politicians stepping up and addressing the fiscal cliff soon and implementing some form of QE3 would be a very cleansing mouth wash but that does not seem to be imminent.

Good Trading
Steve Peasley

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