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Earnings

April 16, 2012 – 5:09 pm

Retail sales for last month as reported this morning were 50% higher than the expectations coming in at about .8% growth. A pleasant surprise but the prior period was up 1.1%. Still it was a good report.

That helped with the opening of the stock market after a tough week last week and a small correction over the last two weeks. Most experts have been expecting a correction but so far the fall of less than 5% barely qualifies.

We are in earnings season and the numbers thus far have been better than expected after analysts’ overall strong revision downward. They expect earnings for the S&P 500 to rise a very small 3.5% for the first quarter and without Apple 2%. The fourth quarter of 2011 gave us a gain of 9.2% so that is a big letdown. However, so far of the few companies that have reported first quarter results 76% of them have beaten their lowered estimates. And those that have beat those estimates did it by a wide margin.

Maybe the experts are a little pessimistic about the first quarter fearing both high oil prices and the slump in Europe. Even if they are, the strong rise in stock prices in the first quarter may mean stock prices are not going to rise much based on stronger than expected earnings. Then again it might mean that any weakness in stock prices will only be a correction, not the beginning of a new bear market. Corrections should be bought not sold.

Good Trading
Steve Peasley

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