Lost in the shuffle of new highs and Bernanke testimony on Wednesday were a one-two punch of earnings misses from FedEx (FDX) and Oracle (ORCL). Both companies rely on corporate spending; a fact that was supposed to be a selling point early this year as corporate America loosened its purse strings and stopped sitting on all that balance sheet cash.
Based off FDX and ORCL, the spending isn't happening. Is it too early to be concerned? Jon "Dr. J" Najarian, co-founder of OptionMonster.com says no. "It's a trade down time," he says in the attached clip. Firms are still cutting corners wherever they can; a practice that seems so last year, but is lingering into first quarter.
The markets are shaking it off thus far, punishing the stocks themselves but leaving the broader market momentum intact. Najarian isn't counting on that resiliency to last unless earnings improve.
FedEx and Oracle are outliers in that their fiscal calenders don't jibe with the seasons. The real reporting period gets going in early April. "Sadly that is right when we get that 'sell in may and go away,'" Najarian notes, alluding to the traditionally weak summer market season when volumes fall off and so do stock prices.
There's a chance, remote though it may seem, that business picked up on a corporate level in January when the country didn't fall off the fiscal cliff. Possible but unlikely. For investors worried about a repeat of last year when a strong first quarter led to a brutal Q2 for stocks, you don't need to be an Oracle to consider the idea that it might be time to take some profits.