Earnings season has officially begun, and investors are anything but impressed with what they're seeing so far. Sentiment has been negative for more than a week, and today markets are falling despite our first earnings beat of the season. The Dow Jones Industrial Average (INDEX: ^DJI ) is down 0.85% in late trading, and the S&P 500 (INDEX: ^GSPC ) has fallen 0.52%.
Alcoa (NYSE: AA ) had the market's attention yesterday, as it does four times per year. The company beat earnings expectations, but investors have still pushed the stock 4.4% lower today. Management said aluminum demand growth might not be as high as expected in the fourth quarter because China isn't growing as quickly as forecast. The recently passed stimulus, which is expected to goose the economy, won't likely affect demand until 2013. The good news is that global auto and aircraft demand remains high, which the market seems to be glossing over for the moment.
Chevron (NYSE: CVX ) is the Dow's other big decliner, falling 4.2% after saying earnings would be "substantially lower." The company is being affected by a reduction in production and lower crude-oil prices. Ironically, some of what hurts Chevron can actually be a positive for the U.S. economy if we pay less at the pump.
Wal-Mart (NYSE: WMT ) led the few winners we had on the Dow after saying it would add U.S. stores at a faster rate. The company will focus on smaller-format stores and hopes to have 500 Neighborhood Market stores by 2016.
The earnings disappointment seems to be overblown for the moment. Maybe stocks got a little ahead of themselves after QE3, but indications from companies reporting and other economic indicators are that the U.S. economy is steadily improving. China may see disappointing growth, but its loss may be our gain in a global economy where the U.S. is still driving demand.
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