Stock Market Watch Starting April 9: Alcoa (AA) Kicks Off Earnings Season As Things Get More Gloomy At Sony (SNE)

Apr. 10, 2012 8:21 AM ETAA, SONY
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After Friday's gloomy jobs report, investor eyes are turning towards Alcoa (AA) which will kick off earnings season when it reports earnings after the market closes and Sony (SNE) which has just forecasted an even more massive loss for the year.

Starting with Alcoa (AA), the Wall Street Journal's Ahead of the Tape blog gave a bit of trivia as to why the company is always first with earnings. Apparently it began under CEO Paul O'Neill, who later became Treasury secretary, as a way to show off the company's management prowess and financial controls.

However and given the horrendous job report last Friday and the fact that Alcoa (AA) is viewed as an industrial bellwether, being first may have its disadvantages as whatever the company reports when the market closes will likely make far bigger waves than normal.

Moreover, it should be noted that last week, Alcoa (AA) announced that it would reduce its annual alumina production capacity by 2% in 2012 amid a global oversupply that has hurt prices. This followed an announcement earlier this year that it would close or curtail 531,000 metric tons or approximately 12% of its global smelting capacity. The company is also aiming to get even more lean and efficient through production cost cutting.

Nevertheless, Alcoa (AA) is challenged by China which has around 40% of the world's primary aluminum and alumina capacity and accounts for 45% of global demand. Specifically, China is aiming for self sufficiency and does not seem to care that as much as 1/3rd of the country's smelters are unprofitable.

Alcoa (AA) also posted a fourth quarter loss after reporting three profitable quarters for the rest of the year thanks to demand from automobile and aerospace companies along with emerging markets like China. On the other hand, demand has been weakening but aluminum prices have also been falling while raw-materials costs climb. Hence, another loss is expected but it will be interesting to see just what surprises Alcoa (AA) may have for investors later today.

Meanwhile, Sony (SNE) has just released an updated forecast where it estimated a record $6.4 billion net loss for the year just ended. This would be its fourth straight year of losses and double the amount of any earlier forecast. Sony (SNE) will also be slashing its global workforce by 6% or 10,000 employees while several senior executives along with the company's Chairman are expected to renounce their bonuses for the year.

The writing off of deferred tax assets in the US is being blamed for the much bigger loss but Sony is also struggling to deal with a strong Yen and fierce competition as it's a race to the bottom in the TV market.

Either way, clearly last Friday's dour jobs report has dampened the mood for the coming earnings season and we might be in for a rollercoaster market ride this quarter. Add in the fact that it's an election year and things could get even more interested. Hence and if you are an active trader, be sure to check your stock forecasts every day and be ready to trade on any predicted higher high or lower lows.


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