Earnings Season Update

January 23, 2011 at 7:11 am 2 comments

We are in the middle of the fourth quarter earnings season, and so far the majority of companies are once again beating expectations.  Bellwether companies, such as Intel, Apple and Google have issued blowout reports.  Market reaction to this, however, has been muted.

While there are special circumstances in cases of the companies mentioned above — Intel’s future is now less certain (see my writeup on Nvidia), and there are top management changes at Apple and Google — when stock price fails to advance or starts declining despite stellar results, it always warrants caution.  The traders are also looking even for slight signs of disappointment, and punish the stock severely if they find them, as was the case for F5 Networks.

It is quite possible that we are nearing a short-term market peak here, which would not be all that surprising giving a 7 week winning streak for S&P 500 which is now near its two and a half year high.  A moderate pullback from these levels would actually be quite healthy — if the markets continue their march higher, a sharper correction will likely result in the future.

Short term worries aside, fundamentals of the market remain solid.  Company earnings continue to grow and exceed expectations.  Benjamin Graham said, “In the short-term, stocks are a voting machine and in the long-term, stocks are a weighing machine”.  And it is the earnings that are those weights.

Entry filed under: Market Conditions.

Seismic Shift in the Chip Industry Gridlock is Good

2 Comments Add your own

  • 1. Gridlock is Good « Sensible Investing  |  February 7, 2011 at 8:35 pm

    […] are now all but forgotten, and even unrest in Egypt failed to derail the market.  In my earlier update, I called for a near-term market top.  So much for giving short-term […]

  • 2. Market Consolidation « Sensible Investing  |  March 15, 2011 at 1:18 am

    […] appears that the market consolidation that I have alluded to previously has finally arrived.  A number of world events in recent weeks has contributed to […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.

Feeds

Recent Posts


%d bloggers like this: