By Street Authority
When aluminum producer Alcoa (NYSE: AA) reports first-quarter results after the bell on Tuesday, April 10, earnings season will officially be underway. What happens to stocks for the next two to three weeks will almost exclusively be a function of what major companies have to say about current business trends. Few investors will have time to focus on anything else -- but they should. Behind the scenes, a steady release of economic data -- especially regarding consumer, business and investor sentiment -- will dictate the trading mood well beyond the current earnings season.
We just got a clear read on how small businesses are feeling. The NFIB Small Business Optimism Index, which I focused on last month, was released on April 10. The news is sobering. After six straight monthly gains, the index fell in March, thanks to a pullback in nine of the 10 components that make up the index. And the analysts at NFIB deliver a real wake-up call after parsing the data:
"The mood of owners is subdued -- they just can't seem to shake off the uncertainties out there, and confidence that the management team in Washington can deal with the effectively is flagging. What we saw in March is painfully familiar -- this was the same pattern of growth followed by months of decline from 2011. History appears to be repeating itself -- and not in a good way."
As I wrote a month ago, "this index actually spiked to 94 last January and February and then dropped back into the 80s. If you sold stocks in April after seeing the NFIB pullback in March 2011, then you would have avoided the heavy losses the market produced later that summer."
The current reading of 92.5 isn't a disaster but the trend needs to be watched. Here's what else you should keep an eye on in coming weeks.