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Analysts Most-Surprised Ever, But Investors Unimpressed

Following two of the biggest market-moving figures in the world last week, Cisco’s John Chambers has his work cut out for him when the networking giant reports earnings on Wednesday. Last week, Apple’s Steve Jobs reported earnings that blew through estimates and released the next I-phenomenon and yet the market didn’t care. President Obama gave a somewhat conciliatory speech and once again the market still sold off.

As we enter the fourth week of peak earnings reporting season, companies in aggregate are reporting profits that are 17 percent higher than analysts estimates, according to Thomson Reuters. This is the biggest “surprise factor” since Thomson started tracking the data 15 years ago and is greatly above the long-term average of just 2 percent.

Yet the S&P 500 is coming off its third down January in a row and its worst month in 11 such periods. Clearly investors do not believe that these good times are going to last.

Yes, Exxon brightens the outlook a bit this morning with its strong earnings report and encouraging thoughts about its natural gas diversification through its proposed purchase of XTO Energy. And yes, health care, especially the biopharma complex, is rising to the top of the sector heap in the S&P 500. Investors such as Pete Najarian, co-founder of OptionMonster.com and Fast Money trader, see more gains to come in both those areas.

But, with earnings season essentially coming to an end this week, traders are in no mood for a Cisco surprise party, even if it’s an amazing one. Instead, they are looking at a sharp turn higher in the dollar, rate-tightening in China, a jobs report at the end of this week and more policy uncertainty out of this administration. Barring some good news on any of these factors this week, look for our 2-month sell-off to continue.

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