Faithful readers of this column will know I've been racking my head to explain what I perceive to be an unusual level of complacency in the stock market (there is evidence for it in the bond markets, also.) Once in a while, I'll come across clues that highlight specific misperceptions; here's one: In a survey of economists by The Wall Street Journal, more than one in five (22%) thought that the White House and the Congress would achieve [my emphasis] "a compromise that deals with the fiscal cliff and makes a dent in long-term deficits." That seems very optimistic, and it makes me wonder if these economists understand what it would take to achieve it.
The Dow (^DJI 1.13%) and the S&P 500 (^GSPC 0.41%) rose 0.9% and 1%, respectively, today as investors were buoyed by earnings "beats" by blue-chip names including investment bank Goldman Sachs and pharmaceuticals stalwart Johnson & Johnson. In fact, it was the Dow's best daily performance since the Fed's launch of the latest round of quantitative easing.
Another bellwether, PC chip manufacturer Intel (INTC 3.85%) also reported earnings that beat estimates -- for both earnings-per-share and revenues -- after the close. However, once you scratch below the headline number, the outlook for future cashflows is not as rosy as the past quarter's performance: Intel said it expects gross margins of 57% in the fourth quarter, compared with Wall Street expectations of 62%. Shares fell 3.4% in after-hours trading, after having gained 2.8% during the regular session.
