Alcoa Kicks off Earnings Season While Tech Slumps

By Tom Luongo in Shares and Markets | October 9, 2012 23:29 | Tags: , , , ,

Alcoa (NYSE:AA) is the bellwether of bellwethers as it is the first major U.S. corporation to report.  A good report from Alcoa is usually a pre-requisite for a good earnings season.  Excluding one-time charges Alcoa earned $0.03 per share on significantly higher than expected revenues of $5.83 billion.  Fundamentally, commodity prices are going to be strong going forward between a mix of QE levitating Western economies to low nominal growth and strengthening emerging market currencies which will drive infrastructure investment that was previously too expensive.

This will undergird markets like Thailand, Mexico and Indonesia.

While I’m not bullish on base metals prices I don’t see them falling significantly from where they are.  They will be volatile, being beaten back and forth by the headlines but ultimately until China resolves some of its structural issues there will be no overall trend in commodities like aluminium.  Oil rebounded again today as it ping-pongs around the $90 a barrel level.

Technology, which has been on a tear for most of the year, is taking a breather as the Nasdaq was off 1.5% today mostly led by Apple (NASDAQ:AAPL) which is correcting off of its highs above $700.  I expect there will be some sector rotation this winter as the effects of QE begin to trickle through the economy.  And since the forecasts are for a thin holiday season technology will likely be under pressure after what has been really a banner year.

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.



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