Alcoa bellwether earnings report sounded loud and clear throughout global markets. Not only has it boosted European commodity stocks, but CEO Ashwani Kaul thinks it has set a very positive tone for U.S. earnings.
His is a contrarian view, as the European debt crisis has pushed Wall Street analysts' estimates collectively down over the last few weeks. They're expecting single digit S&P growth — not double.
As if to make negative sentiment official, the Bank of France said Tuesday that the economy stalled in the 4th quarter. This only affirmed Kaul's outlook.
"Expectations have come down some much, there's room for a lot of positive surprises. Expectations are for 8 percent S&P growth, but I think we're going to hit double digits once all companies report, they've been controlling costs and profits are coming in," he said.
Kaul thinks weakness in the euro zone affects market psychology far more than it does S&P profits.
"Emerging market activity affects the S&P a lot more than euro zone does."
The market is backing up his view. S&P sectors rallied across the board, led by materials, up 2.22 percent on Tuesday. The largest U.S. aluminum producer, Alcoa, forecast 7 percent demand growth for the metal, based on emerging market prices.
Kaul says U.S. corporate transparency is all the market needs to boost confidence.
But ironically, too much information from companies poses the biggest risk: "More than the numbers, corporate language is what scares me the most. All we need is big companies saying 'we're seeing a lot of uncertainty in the markets' on analyst calls, and an up-market can go sideways."
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Disclosures:
Disclosure information about Ashwani Kaul was not immediately available.