July 10, 2012 at 09:32 AM EDT
Alcoa Earnings Beat the Estimates–What a Farce!
Tuesday, July 10, 9:25 a.m. During the 2nd quarter Alcoa warned several times and lowered its earnings guidance, and Wall Street lowered its estimates, as should be its reaction to the later information. The consensus estimate was lowered to 5 cents a share. The earnings were released last night, and surprise, surprise, they came in [...]

Tuesday, July 10, 9:25 a.m.

During the 2nd quarter Alcoa warned several times and lowered its earnings guidance, and Wall Street lowered its estimates, as should be its reaction to the later information. The consensus estimate was lowered to 5 cents a share.

The earnings were released last night, and surprise, surprise, they came in at 6 cents a share, “beating Wall Street’s estimates”.

The stock rallied in after hours trading.

And how great was the report?

Alcoa actually posted a net loss of $2 million compared to a profit of $322 million (28 cents  share) in the 2nd quarter last year. And sales were down 10% from $6.59 billion a year ago to $5.96 billion in the 2nd quarter this year.

But excluding ‘one-time’ costs like the $45 million cash charge to settle a bribery suit in Bahrain, the company was able to report a profit of $61 million, or 6 cents a share.

Even that is an earnings decline of 78% from the year ago report.

However, as is typical after issuing the dismal earnings report, the company said it has a positive outlook for future quarters, saying the company will capitalize “on accelerating demand in high-growth end markets such as aerospace and automotive.”

And Wall Street is of course bullish on the stock.

Meanwhile, Alcoa’s chart is interesting for a couple of reasons.

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The big holders of Alcoa stock were on top of the situation, selling relentlessly since the stock’s peak in April of last year, driving the price down more than 50%.

But note the impact of each quarterly report “beating the street’s estimates” all the way down. The red X’s show the approximate releases of each quarter’s report.

Each time the report ”beat the estimates” and the forward guidance expressed optimism that the problems were over and the future looked promising, the stock popped up, which allowed the institutions to unload more at a somewhat higher price, before the decline resumed.

But since Alcoa has the distinction of starting the earnings reporting season, it is also important to try to make its reports look better than they are, to try to give a hopeful tone to the rest of the season.

Good News From  Europe.

At their meeting yesterday euro-zone officials agreed to give Spain an extra year to bring its budget deficits under control, and to provide 30 billion euros by the end of July to begin the bailout of Spain’s banks.

The news has Europe’s markets rallying after four straight down days.

Do You Know How Your Financial Advisor Gets Paid?

From Morningstar Research with the above title:

“In a recent discussion forum on Morningstar.com, posters shared a wealth of commentary on selecting a financial advisor. The thread pointed out, yet again, the mass confusion that confronts individual investors attempting to select an advisor to manage their money and otherwise look out for their interests.

Would-be consumers of financial advice often hear they should inquire about the advisor’s compensation structure. But even that’s a mess.

One key area of confusion? What it means to be a ‘fee-based’ advisor, versus one who’s ‘fee-only’ or ‘commission-only’. Some investors incorrectly assume that the presence of the word "fee" means that fee-based advisors are free of the conflicts of interest that can affect commission-based brokers. In fact, of the three major compensation structures for financial advice, only ‘fee-only’ advisors avoid commission-based products altogether, along with the potential conflicts of interest that business model presents.

If you’re interviewing advisors, it’s reasonable to ask them to classify themselves into one of these groupings. And if an advisor refuses to detail compensation, or worse yet, says that their advice is free, that’s a huge red flag and you should find someone else.”

Subscribers to Street Smart Report: In addition to the charts and signals in the premium content area this morning, there is an in-depth ‘Gold, Bonds, Dollar, Commodities’ update in the subscribers’ area of the Street Smart Report website from yesterday. And tomorrow there will be an in-depth ‘U.S. Market Signals and Recommendations’ Report.

To read my weekend newspaper column ‘Markets, Economies, Central Banks – All Out of Power’ click here.

Yesterday in the U.S. Market.

A somewhat negative day. The Dow was down as much as 85 points by mid-day, but then climbed back in the afternoon to close down only 36 points.

The Dow closed down 36 points, or 0.3%. The S&P 500 closed down 0.2%. The NYSE Composite closed down 0.3%. The Nasdaq closed down 0.2%. The Nasdaq 100 closed down 0.1%. The Russell 2000 closed down 0.3%. The DJ Transportation Avg. closed down 0.3%. The DJ Utilities Avg closed down 0.3%.

Gold closed up $4 an ounce at $1,587.

Oil closed up $1.24 a barrel at $85.69.

The U.S. dollar etf UUP closed down 0.3%.

The U.S. Treasury bond etf TLT closed up 0.9%.

Yesterday in European Markets.

European markets were down again yesterday, but only fractionally. The London FTSE closed down 0.6%. The German DAX closed down 0.4%. And France’s CAC closed down 0.4%.

Asian Markets plunged Sunday night and were down some again last night.

The Asia Dow closed down 1.4% Sunday night, and down 0.2% last night.

Among individual markets last night:

Australia closed down 0.5%. China closed down 0.5%. Hong Kong closed down 0.2%. India closed up 1.3%. Indonesia closed up 0.6%. Japan closed down 0.4%. Malaysia closed up 0.4%. New Zealand closed down 0.4%. South Korea closed down 0.4%. Singapore closed up 1.2%. Taiwan closed down 0.8%. Thailand closed up 1.5%.

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To obtain access please click on the ‘Subscribe’ link. It will take you to an information page on subscribing to Street Smart Report, a subscription to which includes access to the premium content area of this Street Smart Post blog.

This morning in the premium content area: U.S. market signals, and investor sentiment.


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Markets This Morning:

European markets are back up this morning. The London FTSE is up 0.9%. The German DAX is up 1.3%. France’s CAC is up 1.3%.

Oil is down $.36 a barrel at $85.63

Gold is up $11 an ounce at $1,598 an ounce.

This Morning in the U.S. Market:

This week is a very light week for potential market-moving economic reports, but they will include the U.S. Trade Deficit, Small Business Optimism, the Producer Price Index, and Consumer Sentiment. To see the full list and times for each release click here, and look at the left side of the page it takes you to.

There were no reports yesterday.

This morning’s only report is that the NFIB Small Business Optimism Index fell sharply in June, falling from 94.4 in May to 91.4 in June, its lowest level since last October. “There was no good news in the survey,” NFIB said, with businesses downbeat on sales, earnings, and hiring.

However, there was some positive news from Europe. Manufacturing output in the U.K. rose 1.2% in May from April (but down 1.7% from May a year ago).

After the market’s three straight down days, our pre-open indicators are positive this morning.  

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being up 70 points or so in the early going.

Subscribers to Street Smart Report: In addition to the charts and signals in the premium content area this morning, there is an in-depth ‘Gold, Bonds, Dollar, Commodities’ update in the subscribers’ area of the Street Smart Report website from yesterday. And tomorrow there will be an in-depth ‘U.S. Market Signals and Recommendations’ Report.

To read my weekend newspaper column ‘Markets, Economies, Central Banks – All Out of Power’ click here.

I’ll be back with the next regular blog post on Thursday morning at 9:25 a.m.

Non-subscribers: Did you think we are expensive? Just $25.95 a month on your credit card. Cancel at any time after 1st month. Is your portfolio not worth that? We believe we can help you not only make more profits, but just as importantly avoid losses, and at very reasonable cost!

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And we are off to an even better start this year, both portfolios outperforming the market so far, and moved up to #1 Long-Term Market Timer in Timer Digest’s April issue.

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