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BEHIND THE MONEY: Stocks in a Show-Me-Sales State As Earnings Reports Approach
As the market failed to get going this week after a not-as-big-as-expected loss from Alcoa, not-as-high-as-expected jobless claims and better-than-expected June retail sales figures, it has become readily apparent that good enough is no longer good enough for this market. Investors now want to see some actual growth on the demand side before they add to the best quarterly rally for the S&P 500 [.SPX
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] in a decade.
When first quarter numbers came out, the market rallied as companies beat on the bottom line through cost cutting. Revenue actually missed expectations. Now it's time to show me the sales.
A great chart below from the crew at Bespoke Investment Group shows the percentage of companies that beat revenue forecasts the last 7 years. "In order for the market to regain the momentum we saw in the early stages of the rally, investors will need to see better than expected results on both the bottom and top line," wrote Bespoke, in a note to clients last night.
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Source: Bespoke Investment Group |
Goldman Sachs [GS
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] is one company that WILL show improvement on the top line, according to Bank of America Merrill Lynch [BAC
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] analyst Guy Moszkowski. Its trading revenue may actually beat 2007's record, according to the widely-followed analyst.
Still, even that may not be enough for a stock that is up 70 percent this year, said FM trader Guy Adami last night.
When even Goldman can't do enough to pass the bar set by traders for this reporting season, the market's correction may continue until this stormy earnings season is over.
John Melloy is the Senior Editorial Producer for Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team.______________________________________________________
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