Friends,
Mr. Market seems a bit grumpy these past several days. Earnings season has begun, and it sure looks like companies are going to have a difficult time pleasing traders over the next couple of weeks. Hitting your numbers is simply not going to be good enough right now. We have had a very nice advance for the past couple of years, so if you want me to continue to buy your stock, you need to tell me a bright and cheerful story. I don’t want to hear about input cost going up or oil prices changing the patterns of consumers, or even the economic disruption in Japan. No excuses, just weave me a tale of never-ending good news.
Hence the challenge that companies are going to encounter this earnings season. The bar is being set a bit higher these days and it will be interesting to see what companies can get over that bar. Both J.P. Morgan and Bank of America disappointed on numbers announced this week, as it seems that the banks will never be loved again. Will they ever get past this mortgage mess? Will business ever again be “normalized” as so many bullish analyst yearn for? Banks look like where investment money goes to die.
In the meantime, the political wrangling continues about the budget and what to do about the enormous amount of debt that this country has accumulated. Add to that the nervous attention paid to what the Fed will do as QE2 is set to wind down in June, and you get a market that just does not seem to be in a good mood. So far, 1300 on the S&P 500 has held as support, which is encouraging to the bulls, but 1340 seems to be a formidable resistance level that, to this point, has not been able to be penetrated.
Just a bit of advice for the companies about to report earnings over the next few weeks. You better wow me and make me feel good about owning your shares. Summer is coming and I tend to get easily distracted as the weather gets nice. Don’t make me adhere to the old Wall Street adage “sell in May and go away”. I am Mr. Market and have a very short attention span. Companies about to report, consider yourself warned.
Have a nice weekend everyone. We’ll keep an eye on grumpy Mr. Market for you.
