Intel’s blowout earnings report last night is certainly
making it look as though earnings estimates were revised too low for
corporations. And so the overwhelmingly pessimism that drove stocks lower
since early May seems to be shifting to optimism that maybe things aren’t
that bad after all.
Intel’s second quarter EPS were $0.51 on revenue of $10.8
billion. Those numbers crushed the analyst expectations. Analysts wanted
$0.43 with $10.3 billion in sales. Guidance was also way above expectations.
Intel’s management expects third quarter revenue of $11.6 billion from $11
CEO Paul Otellini made sure to let analyst know during the
conference call that this quarter was the best quarter in the company’s 42
year corporate history.
It’s clear that corporations have been spending money on
technology. That’s a key factor for the economic recovery. With record
amounts of cash on their books, it’s hoped that corporations’ willingness to
spend will translate to jobs growth.
I would also point out that Intel’s bullish forecast bodes
well for sales of Microsoft’s (Nasdaq:MSFT) latest office suite.
Of course, we’ve
only has two days of earnings season, so it’s a little early to say that 2Q
earnings will be great for all companies. Intel, for instance, traded higher
following each of its last two quarterly earnings reports, only to give those
After six straight
up days, it might seem like the market should pull back a little. And there
should be a little nervousness ahead of bank earnings, which start with JP
Morgan (NYSE:JPM) tomorrow.
But I have a feeling this market is not going to back off
much, making it difficult for investors to find what they feel is an
attractive entry point.
This is typical of the start of a good rally. The stock
market will surge off of lows when investor sentiment is low, as the S&P
500 just did, jumping from 1,011 to 1,100. Now, investors will be torn by the
dueling emotions of fear and greed. In one ear, greed will tell them to buy,
that prices are headed higher.
But in the other ear, fear will say that they are suckers to
buy after the break higher, better prices will be available if they just
When this happens, the stock market tends to not give
investors the lower entry prices they are hoping for. Investors are then in
the difficult position of having to chase prices, which is not a comfortable
place to be.
Daily Profit readers had the opportunity to get some upside
exposure before the rally began with Citigroup (NYSE:C), JP Morgan
(NYSE:JPM) and Maguire Properties (NYSE:MPG).
This will make it much easier to mediate between the voices
of fear and greed.
There are a couple
things we’ll want to see in the days to come. Good earnings from banks aside,
it will be a good sign if gold and Treasuries decline and oil prices rally.
Gold is especially important, as a decline for gold prices
would be an important sign that investors are ready to embrace risk in the
form of stocks and a general sense that the economy is improving.
Cimpl is very bullish on Chinese stocks. A year long
bear market for Chinese stocks has left valuations at extremely attractive
levels. And Jason is already seeing signs that these stocks are ready to
move. One Chinese stock, China TransInfo (Nasdaq:CTFO), jumped 25% yesterday.
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As always, thanks
for all of your comments, and please keep them coming:firstname.lastname@example.org