Earnings season has begun. Alcoa (NYSE:AA) kicked things off with a report that was better than expected, even though the company lost $454 million in the second quarter. Yes, nearly half a billion dollars.
Alcoa went on to say that aluminum demand will be down 7% this year. One analyst widened his loss estimates for the remainder of this year and 2010. And yet the stock is up 6% in the early going.
How can that possibly be bullish, you ask?
Well good question. And the answer may not come as that much of a surprise: China. Alcoa believes that Chinese stimulus spending may help it become "…free cash flow positive very soon…" Alcoa’s CFO said.
*****I’ve discussed China’s stimulus plans at length here in Daily Profit. And I’ve also been aggressively adding Chinese stocks to the SmallCapInvestor PRO portfolio. (Click here to find out which ones.)
But it’s still nice to hear from a major U.S. corporation that China’s $585 billion stimulus spending plan is expected to have a positive effect on commodity pricing and demand.
In fact, Alcoa’s CEO added a little color to China’s stimulus efforts. He reported that China is telling its people "…that it’s good to not have too much savings and to buy new cars and get a new air-conditioner."
It would be ironic if China usurped the U.S. and became the world’s consumer of last resort. And a profitable irony at that.
*****It’s being reported that stocks are rallying after weekly new unemployment claims were down sharply last week. But continued unemployment benefit claims from workers already on the dole rose for the week.
The drop in new claims appears to be an anomaly due to a break in layoffs in the auto industry. There doesn’t appear to be any significant change in the unemployment trend.
*****I hope you’ve been paying attention to Jason Cimpl’s video chart analysis and weekly forecasts. He’s been hitting the market’s next moves with uncanny accuracy. You’ll recall from last week, he was looking for more weakness early this week, with a recovery mid-week. If yesterday’s late rebound can continue today, he’ll be spot on again. Be sure to read tomorrow’s Daily Profit to view Jason’s forecast for next week.
And his prescient forecasts are making money for subscribers to TradeMaster Daily Stock Alerts, too. They just took 15% on the Ultrashort Financial ETF (NYSE:SKF) in 8 days. And it looks as though he’s getting his readers ready for some upside trades.
Of course, you’ll get his video forecast in tomorrow’s Daily Profit, but if you want to start getting his profitable trades, too, then you’ll want to sign up for TradeMaster Daily Stock Alerts. There’s a 30-day trial available. Click here to find out how you can enjoy steady profits in this uncertain market.
*****The PPIP is doomed. PIMCO’s Bill Gross is dropping out of the government’s program to remove toxic assets from banks’ balance sheets. Gross and Co. are apparently concerned that the government has gotten too unpredictable, changing its mind, and even the terms, of other bailout measures retroactively.
Plus, there’s also the likelihood that banks won’t sell toxic assets at anything resembling attractive prices. And that will kill the program.
I still believe Geithner blew his opportunity to use the stress-tests to force banks to sell their toxic assets and improve their balance sheets. But as we know, Geithner simply does not play hardball. And that’s too bad, because our economy could use some leadership from the Treasury.
P.S. I just finished reading through a new book by senior trader Larry Connors. It’s called "High Probability ETF Trading". It’s on profitable trading strategies using ETFs and he’s hitting a 93% win rate. I don’t know about you, but I’ll take 93% any day. He gave me a link to more information about the book to share with Daily Profit readers (I asked him for it as readers send me a ton of questions on ETFs). Click here to find out more about his book and discover how to get up a 93% win rate on your ETF trades.