Earnings Season Dragging Down Stocks

Marc Sperling
October 19, 2012

Futures are a bit softer this morning as earnings continue to confirm the slowing-growth thesis. The data has been weak, but the market has been driven more by central bank action over the past few months. It's hard to know what is priced in at this point. This earnings season was expected to be one of the weakest in recent years, and we are starting to see that play out. It feels like a lot of stocks are getting beat up far worse than the indices which has lots of traders a bit more cautious and scratching their heads. There is something for everyone, to the long and short side depending on where you want to be, just choose where you live. Following one of our trading rules from my new Swing Trading Course, we do not take stock positions into earnings, and that approach has been prudent.

A host of big names are trading lower pre-market today after mediocre earnings. McDonalds (MCD) is off about 3% after reporting weak operating income. General Electric (GE) is down 1.5% after falling short of earnings estimates. Microsoft (MSFT) is about 2% lower after disappointing with its third quarter earnings results.

Among the momentum names, Chipotle (CMG) is taking another beating after lowering its growth outlook. CMG was crushed after its last earnings report after noting the detrimental effect of rising food prices on its profit margins. Today, CMG is getting hit hard once again, and is set to open down around 11%.

Google (GOOG) was obviously in focus yesterday after the company had its earnings report released pre-maturely around 12:30pm ET. The numbers were poor, triggering a sharp sell-off in the shares. The stock was halted around 1:30pm, did not get any further downside momentum after being unhalted at 3:20pm. This morning, GOOG is set to open about 10 points (1.35%) higher.

*DISCLOSURES: Scott Redler has no positions