Earnings, schmearnings. The stock market simply doesn’t care.
After the close yesterday, May 18, Hewlett Packard (HPQ) reported earnings for its fiscal second quarter of 2010 of $1.09 a share. That was 4 cents a share better than Wall Street had projected. Revenue climbed 12.4% from the second quarter of fiscal 2009 to $30.8 billion. That too was above the Wall Street consensus (at $29.82 billion.) And the company raised its guidance for fiscal 2010 to $4.45 to $4.50 a share. That is slightly above the $4.45 Wall Street consensus and well above the $4.37 to $4.44 a share that the company had projected earlier.
The stock market didn’t care.
Shares rose 2.2% in after-hours trading, but gave most of that back once the market actually opened. At 3:30 ET today the shares were up just 26 cents or 0.56%.
Before the stock market opened today, May 19, Deere (DE) reported fiscal third quarter earnings of $1.58 a share. That crushed the Wall Street estimate of $1.09. The company did miss slightly on revenue, reporting $6.55 billion (up 5.8% year-to-year) rather than the $6.62 that Wall Street was looking for. But the company did raise its guidance for all of fiscal 2010 for revenue (to $23.04 to $23.45 billion versus the consensus of $22.46 billion) and net income (to $1.6 billion versus the consensus of $1.38 billion.)
The stock market cared a little more—shares are up 2.33% today as of 3:30 ET. I leave it to you to figure out if a gain of that size is commensurate with Deere’s earnings beat.
Even if the stock market doesn’t care much today, I think these are important earnings results. They show that the U.S. economy is still growing strongly—or at least that it was over the last three months. That bodes well for the economy’s ability to survive the euro crisis and to continue to slowly add jobs.
Another observation.
All the fear about banking regulations being tightened. This is predicted to be a major blow to the market.
A year ago, [ and to this day if you listen ] people said the market would never really recover until people on the sidelines stopped being afraid to get into the market.
The markets may be factoring in the ugliness that may come about with a slow-motion dissolution of the EU and the collapse it might bring to some large French and German banks.
That seems to be the most likely path that the EU is now set upon. If so, the results may be a second severe dip downward, more deflationary pressures and perhaps even a long term mini-depression. The risks are certainly out there. Current earnings don’t mitigate these major new risks.
The market didn’t care! They’ve got Merkel on the brain…FEAR! Fear that their mess will spread to our economy. Regardless of how strong our recovery is, and I argue it’s solid, Ed may have a point, but psycology has the market by the “?”. Until people begin to believe again, enough to buy, enough to get off the sidelines, enough to see the flowers of earnings reports blooming, the VIX will treat us harshly.
Yes, the Jasmine is in bloom and smells wonderful…Hummingbirds flit about…People ignore these too. Stocks are in full bloom with earnings reports and guidance enough for anyone to smell…It’s a matter of time when that reality reaches their collective financial noses. Until then…I’ll buy opportunities and hold what I got!
I’ll cry a few of those tears for those blood sucking credit card companies too.
I’m happy to own shares of DE and HPQ, with good profits in both – and I think much better profits to come. I would buy more of both but I would have to sell equally good companies to raise the cash. I think I’ll just hold ’em all.
Maybe if Wall Street had had some “onerous” regulations coupled with a little enforcement of the laws in place, we wouldn’t be in this mess. I can only shed crocodile tears for the Wall Street crowd.
Holy Cow! How could I have left THIS out! The November elections, when every incumbent’s butt is in the crosshairs, and all they can think to do is target Wall Street with more onerous regulations, with untold unanticipated consequences for both business and consumers alike. Look at what they’ve already done to the credit card business, the main arteries of small business.
The market doesn’t care now for the very same reason it didn’t care in March ’09 when it started UP in the face of “Armageddon”…it ANTICIPATES the economy 6 – 9 months out. FASB has allowed banks to hide billions of non-performing assets, interest rates can only go up, stimulus packages are expiring, the jobless rate is increasing, foreclosures are rising, delinquencies are rising, income taxes and sales taxes are falling, the federal budget monthly deficit just set a new record, state and local governments are bankrupt and firing employees.
What else need I say?
Jim,
You know the old saying about “past results”.
If you follow commodities, then you know the industrial metals have been dropping. Why would they drop if industrial production was picking up?
I’m sure you saw the CPI and PPI numbers. Why are they dropping?
The answer to both of these questions is obvious: deflation.
Ask yourself why the Federal Reserve STILL isn’t raising their rates? Contrary to what the FOMC minutes say, they know that deflation is still a MAJOR concern.