Are You Bullish or Bearish?

The parade of positive earnings reports marches on. The
number of companies in the S&P 500 that are beating expectations
continues to run at a better than 70% clip.

It’s interesting how sentiment was so conflicted coming into
2Q earnings season. We discussed at length here in Daily
how analysts had lowered estimates and investors appeared to
be expecting earnings growth to slow.

At the same time, there were virtually no
pre-announcements that earnings would miss. And investors then, like now, were
having a hard time getting bullish on the stock market.

Bullish on Earnings

*****Oil is pushing past $83 a barrel after China reported a 21% increase in oil imports during the fourth quarter. That’s a huge jump, and serves as a perfect counter-point to the analysts who have been saying that supply and demand fundamentals don’t support the current price for oil.
The problem seems to be that some analysts only look at the supply and demand numbers for the U.S. And even then, they seem to be fixated on inventory numbers. That’s simply not enough information.
Oil is a global commodity. And while the U.S. may be the biggest user, the most growth in oil consumption comes from emerging markets, like China. If you simply ignore China and the fact that global production is falling, it’s easy to come to the mistaken conclusion that oil prices should be lower.
*****As oil prices rise, it makes other energy sources more valuable, too. Alternative energy stocks rise with oil prices. And we’ve seen natural gas prices rally from an important bottom in recent weeks.
Coal is another energy source that’s becoming more valuable as oil prices rise.
With carbon emission caps looming in the U.S. and a global debate on curbing carbon emissions that most recently landed in Copenhagen, many investors have turned their back on coal. But that could be a mistake.