Caution Ahead of Earnings

Caution Tape

Image by Picture Perfect Pose via Flickr

It’s open season once again for earnings announcements beginning with Alcoa tonight and fellow Dow component JP Morgan on Friday. For investors and traders, the name of the game this quarter will be “caution.” Despite a recent spate of better-than-expected US economic news (think jobs, manufacturing and retail data), the shadow of Europe’s fiscal woes continues to hang over the markets and keep the bulls in check. Quite a few companies, including Alcoa, have already given the Street a glimpse of dismal earnings reports to come and while it’s not all negative (there will be many upside surprises as well), I suspect it will take a shocking earnings report (good or bad) to get any real reaction out of the market.  Cautious investing means most companies will continue to trade in lock-step and headlines out of Europe will drive stock prices even on earnings day. 

For more insight into the numbers behind the expectations see Justin Blaber's blog