×

Pros Say: Beware Financials and Bankers

At the start of this short market week, the pros focused on last week's market strength in the face of bad jobs numbers, this week's launch of earnings season, and the stress tests on banks, which are to be finished by the end of the month. Various combinations of outlooks prompted them to suggest, variously, that a bottom is being formed, or there could be another leg down before real recovery begins.

---------

Earnings Expectations? Beware The Financials

Zacks Investment's Dirk Van Dijk said there's been a dramatic increase in expectations for first-quarter earnings of financials, particularly the megabanks, but overall, the total earnings for the S&P 500 are expected to be 27 1/2 percent lower than for the comparable quarter last year. The change in the FASB rules improve the "accounting earnings," but do nothing to juice the underlying "economic earnings."

  • Banks Are Basically Insolvent: Soros

As for bankers' judgment, "Is there any group in America, with the possible exception of crack-heads, that has shown significantly worse judgment over the past few years than bankers?"

-----------

Unemployment Doing a Job on Optimism

Friday's jobs numbers were a setback, according to RBS Greenwich Capital's Michelle Girard. Other data have been looking better, even housing starts, and there was talk of a bottom forming. Consumer spending will continue to hold up only when the job picture improves. LPL Financial's Jeffrey Kleintop pointed out that the jobs number is a lagging indicator, and initial jobless claims, a leading indicator, has in fact shown some signs of stabilizing. The lows may have been set, but there is still likely some volatility ahead.

---------

Alcoa Earnings: The Week's Big Market Mover

George Dowd of Newedge said Tuesday's kickoff of earnings season with Alcoa's first-quarter numbers will be the main event of this short market week. He would not be surprised to see some pullback after the recent powerful rally. The higher close after Friday's dismal jobs report indicates that the market is very strong technically. The FASB decision on mark-to-market reform was a form of "dirty pool," but it also helped the markets.

---------

G20 a Plus for Markets; Stress Tests Are the Next Hurdle

MF Global's John Brady said economic developments like the surprising outcome of the G20 meeting last week have encouraged investors and strengthened the markets, and the next big development will be the results of the stress tests of the large commercial banks like Citigroup and Bank of America that come out toward the end of this month. Negative influences could include worsening credit-card receivables, a by-product of unemployment.

-----------

CNBC Investor Tools: