Earnings season begins today with Alcoa. The majority playbook, which we have telegraphed for a month, is to ride the wave off the March 6th lows going into earnings season, then lighten up as stocks move sideways to down on the back of VERY CONSERVATIVE guidance.
The mantra of the bears has been that CEOs will LOWER EXPECTATIONS FOR THE REST OF THE YEAR.
Bears are already pointing to the action in the Baltic Exchange Dry Index, which today fell for a 20th straight day and has now retraced a bit more than 50% of its bounce from its low inearly December.
We start earnings with Alcoa, and just to keep it in perspective: it has a weighting of only 0.8 percent in the Dow.
1) The weak spot are banks, which are down mid to high-single digits in Europe.
Royal Bank of Scotland, which is essentially a ward of the state, has announced plans to lay off up to 9,000 people in back-office operations as they too are chafing under government control: "We have set a new strategy for RBS to restore the bank to standalone strength as soon as practicable," CEO Stephen Hester said.
2) It's something, but not much: Humana, Coventry, and UnitedHealth, among other HMOs, trading down this morning as they got a modest but still measurable increase of 0.81 percent for Medicare coverage in 2010 from the government. That's not much, given the inflation in healthcare, so it's likely premiums will increase, or benefits will be cut, for those enrolled in the Medicare Advantage plans.
3) Brinker (Chili's) up 10 percent pre-open, forecast earnings for the quarter of $0.33-$0.34 (consensus is $0.29). Chili's comp store sales down 5.2 percent, Maggiano's down 9.5 percent. Wachovia raised them to outperform.
4) The Term Asset-Backed Securities Loan Facility will be opened for a second time today: will participants play, given the reticence to participate in any government programs? It’s been sparse so far.
5) The Fed is selling a lot of debt this week: about $60 billion worth. We have a 10-year, $6 billion TIPS auction today ahead of the $36 billion in 3-year notes tomorrow, then a 10-year auction on Thursday.