Does the economy have feet of clay? Or is it jacked-up? Traders went into last week, the start of earnings season, seeking answers. They left the week lost in a valley of indecision. Come the end of this week, despite reports from the likes of Citigroup (C), Bank of America (BAC), IBM, Coke (KO) and Intel (INTC) and a convoy of economic reports, traders will be wandering around the same valley, still lost.
In the thick of every earnings season, inquiring trading minds want to know: how's the economy doing? And so they make interpretations. But even in normal circumstances, traders are brusque and impetuous, prone to jump to conclusions. And these are no normal times.
Last week, Alcoa (AA), as always, kicked-started the season and seemed to point to a formidable economy, followed by contrary evidence from the likes of JP Morgan (JPM), Wells Fargo (WFC) and Google (GOOG.) In all cases, traders were initially enamored of the earnings, before a starker and more measured reality set in. For Google, revenues were a touch light and cost-per-click remained problematic. There was less there than first met the eye for the financials too.
If JP Morgan and Wells Fargo could not impress the market by pointing to a sure-fire recovery, there is little chance that Citigroup, the sector's weaker sister, will. Bank of America, too, has problems that run deeper and more systemic than either of last week's financial bellwethers. That doesn't bode well. At best, they'll hold ground and holding ground grants traders no compass. Johnson & Johnson (JNJ), too, just last week fined for misleading physicians over an anti-psychotic drug, is too riddled with troubles to point in a definitively good direction.
That leaves us with Intel (a distinct possibility for a decent report), in addition to IBM and Coke , which might also shine to some degree. But at best, this leaves us at a standoff between the prospects of a good and bad economy, a confusion that should be heightened by a decent retail sales number (if March same store sales are indication), followed by rank disappointment in housing starts and existing homes sales.
The takeaway is that there will, despite all the earnings reports and economic reports, be no takeaway. In a market starved for directions, it's important to realize before the crowd does that the hunger games will go on.