Major Earnings Beats from Leaders (GS & AAPL)

Tuesday, April 20, 2010

The market closed marginally higher in this 2-day bounce after the GS news hammered stocks. A slew of great earnings reports have reassured investors even though GS faces a probable fine from the SEC for its fraudulent dealings in the Abacus deal. Companies continue to beat analyst expectations and have been consistently adding on the top line as well, an important accomplishment in this earnings season. Here's a quick rundown of the most recent reports:

IBM: Reports EPS $1.97 v. $1.93e, revenues $22.9B v. $22.8Be
GS: Reports EPS $5.59 v. $4.00, revenues $12.8B v. $11Be
JNJ: Reports EPS $1.29 v. $1.27e, revenues $15.6B v. $15.6Be
KO: Reports EPS $0.80 v. $0.74e, revenues $7.5B v. $7.7Be
AAPL: Reports EPS $3.33 v. $2.45e, revenues $13.5B v. $12Be

The market leaders are marching on! Goldman Sachs (GS) and Apple (AAPL) absolutely crushed analyst estimates on the top and bottom line this earnings season. While this rally has been huge so far and the bears are out in droves in the blogosphere, earnings continue to beat the Street's expectations. Even with the heightened caution seen after the GS suit, good earnings are have been bought this week. I see no reason to be bearish at these levels and would probably be looking to pick up banking shares if I were a long-term guy. A steep yield curve with the short-end at zero is a license to print money; this has yet to change. The level of teeth in the upcoming financial reform legislation is an unknown and may be a short-term cloud over the market but I suspect it will not be too detrimental in the long-term. Time will tell. For now, I have yet to be paid on short ideas so I'll keep those light and continue looking for long plays.

Nike (NKE) finally triggered through the $76 level but I am still struggling to get paid on the idea. My management of this position has been relatively poor and overtrading has lead me to make some mistakes with it. I'm back down to a core position that I will just hold and not trade around unless the technicals show a very compelling pattern. For some reason, this stock does not trade very well technically intraday and I have been caught in some strange, nonsensical moves. For now, I'm just holding a core now and looking for higher prices.
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