Earnings Surprise, Yet Stocks Slump

Interesting day to be watching stocks… have the tables turned?

This morning had all the makings of the typical 2009 market rally. Check out these earnings, all within the last 24 hours:

  • Apple reports a 46% jump in profits from last quarter, beats estimates by 17%
  • Caterpillar reports 64 cents a share worth of earnings — more than 10 times Wall Street estimates
  • Coca-Cola comes in line with expectations
  • Dupont beats earnings
  • So does Pfizer
  • United Tech loses money, but revenue tops expectations
  • Ditto with Bank of NY Mellon
  • Texas Instruments beats estimates and provides better-than-expected forward guidance.

So that’s good news (by 2009 standards) from essentially every sector, including five Dow components. Naturally, the Dow — which has been ignoring economic fundamentals for months in favor of poor, but still better-than-expected earnings — quickly breaks its four-day winning streak by plunging 0.75%. Say what?

Looks like beating Wall Street’s estimates can no longer satisfy the mob.

“A rational, disciplined investor would be fearful about buying today,” notes Dan Amoss, “after prices have been jacked up by an unprecedented seven-month rally.

“Nearly every economic and corporate development over the past few months has been translated into a reason to buy stocks. But underneath the elation over Dow 10,000 lies the palpable feeling that this rally is to be ‘rented,’ not ‘owned.’

“Bulls see this cautious sentiment as a source of more untapped buying power, but I see it as a reflection of weak hands being the marginal buyers; at the first sign of disappointment, they’ll look to sell. My read of the sentiment surveys is that patient value investors are skeptical and bearish, while momentum investors are bullish simply because prices have been going up.”