Why Markets Will Thrive During Earnings Season

Can you feel the rumbling? It’s that time again, when a tight feeling in your gut comes back to put you in stitches, anticipating company results of the previous quarter.

Yeah, it also gives me knots; and when you play the options game and rising volatility – well, it become a binary situation. The past two earning seasons were quite good.

October 2011 showed us a remarkable move as the fear of recession subsided, while January launched the markets into a strong drive up that continues now. What’s in store for April, the first quarter results of 2012?

This is going to be a decent earnings season. The economic data for the past couple of months portray an economy that is growing moderately well.

I suspect the GDP comes in 2.5.3% for the first quarter which is similar growth the Q4 of 2011. Jobs growth has been decent, technology has led the stock market, energy prices have started to come down and the consumer is spending.

Several estimates I have seen show operating earnings growing from 1-3% from a year ago, but let’s not forget the last two weeks of March 2011 had a near shutdown of business and panic due to the Japan earthquake/tsunami.

Some factors I’m looking at:


  • Solid job growth throughout the quarter
  • Decent export numbers even with a stronger dollar
  • Lower overall inflation
  • Lesser fear from Europe as they work to settle their crises
  • China still growing at a decent rate while inflation there is coming down
  • Strong consumer spending as portrayed in consistent retail sale numbers
  • A resurgence in banks and housing – sore point for the past few years
  • Investment sentiment has been tilting bearish while consumer sentiment is strong

While the economy is in motion and things can change I am somewhat confident this earnings season will bear some fruit. Of course, the stock market is up strong for the first quarter and may have reflected the enthusiasm.

As always, the guidance is the key for corporate profits and markets going forward. With low inflation, low market rates and an environment prime for more growth it’ll be interesting to say the least!

Bob Lang is the Senior Market Strategist for options trading newsletter Explosive Options