(By Jeffery A. Miller) Game time! Earnings season -- with special significance.
It is always important.
- Owners of growth stocks can be especially vulnerable to a missed quarter, since an earnings miss affects both the "E" in the P/E ratio and may also lead to a lower multiple.
- Owners of cyclical stocks
- Even owners of dividend stocks need enough growth to provide support for current and future yield.
This time the earnings story is even bigger. It is objective, non-government evidence of the state of the economy. Market skeptics insist that earnings estimates are too high and "must move lower." They expect that the reduced pace of economic growth and problems in Europe have put pressure on profits.
I'll offer some thoughts about the earnings season in the conclusion, but first let us take our regular look at last week's data and events.
Background on "Weighing the Week Ahead"
There are many good sources for a comprehensive weekly review. I single out what will be most important in the coming week. My theme is an expert guess about what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios.
Unlike my other articles at "A Dash" I am not trying to develop a focused, logical argument with supporting data on a single theme. I am sharing conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am trying to put the news in context.
Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!
Last Week's Data
Each week I break down events into good and bad. Often there is "ugly" and on rare occasion something really good. My working definition of "good" has two components:
- The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially -- no politics.
- It is better than expectations.
The Good
Despite the stock market reaction, there were some bright spots in last week's news. These were probably less important than the bad news, but still worth noting.