Every three months, the smallest and least consequential member of the world's most elite stock grouping is showered with disproportionate attention when its quarterly earnings come out. I am referring, of course, to Alcoa (AA) and the upcoming release of its first quarter results. Because of its unique position as one of only thirty companies that make up the Dow Jones Industrial Average, Alcoa gets a degree of contemplation that comparably-sized $8.5 billion businesses such as Whirlpool (WHR), Juniper (JNPR) or Tiffany (TIF) simply don't.
As my co-host Jeff Macke and I discuss in the attached video, Alcoa's role heralding the impending stream of financial reports we collectively call earnings season is not so much about its relatively minuscule impact on the capital markets, but rather upon the fact that it is first.
To that point, FactSet earnings analyst John Butters looked for correlation between Alcoa's results and the subsequent performance of the markets, as well as the degree of earnings season surprises (or disappointments) and found "little predictive value" to crow about.
Simply put, As Goes Alcoa, So Goes the Market just isn't applicable.
What Butters does highlight is the fact that expectations for Alcoa, and the entire Materials sector, have come way down over the past 90-days, at exactly the same time that stocks have touched all-time highs.Read More »from Alcoa Earnings Matter More Than You Think