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Dos Hombres: Bulls Are Still Beating the Bears

Fin - Breakout - US

Two guys, two thoughts, two minutes...GO!

Matt Nesto kicked off this Dos Hombres session acknowledging a huge wad of glumness and following it with a reality check. Citing a late Easter, darkening economics and a recent sell-off that's been flogged to death by the media (mea maxima culpa), Nesto noted that the Street may be down over what could be, not what actually is.

The S&P is only down 1.1% month-to-date. What's more, while markets are down 7 of 10 days in April, those results aren't particularly unusual. Say the odds of a market being down on any given day are 50/50 (they aren't, but that's close enough). Based on that assumption, the odds of any 7 out of 10 days ending lower is roughly 12%. To paraphrase my dad, "Stop whining -- or the market will give you something to whine about."

I took a look at who's winning so far in earnings season, folks lining up to short or those getting long in front of reports. I used two companies that reported this morning as my subjects; while in fairly different industries, each is facing rising costs, a weak consumer and margin pressure.

The first example was Supervalu (SVU). On the surface, SVU looks like what happens when low expectations meet decent performance. SVU lost more than last year and came in fairly light on revenues. But the company also beat on EPS and guided a bit higher for the year. Not coincidentally, SVU is over 10% higher as I write.

On the other side we have Hasbro (HAS). HAS missed on revenues, due in large part to a soft consumer. The company also was weak on EPS, citing rising general costs. It additionally made some remarks about development, which translates, roughly, into "we're so out of ideas at this point that we're simply throwing money at the problem."

Alas, the bears betting against the toy titan are teary today, as Hasbro's stock is down a mere 2%. When a beat is worth 10% and an earnings abomination results in a 2%, it suggests Nesto has a point (Shhhh...). In the long or intermediate run we may be heading lower, but these bets not paying off yet. All things considered, the market and her stocks are hanging in just fine, thank you, despite the hand-wringing.

Tomorrow is promised to no one but today isn't all that bad.

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