Thursday's Big Earnings Day

As I mentioned earlier, tomorrow is a key day as there are a slew of reports that matter to me (and the market). Before we go there - that late day rally that took us out of the sewer, starting around 2:30 PM? A return of "Fed needs to cut", and bad news is good news thinking due to the beige book.

• The Federal Reserve's latest regional survey didn't have much to offer the bulls, providing instead a picture of a rather sluggish U.S. economy.
• The expansion was generally described as "moderate," "modest" or "mixed," the Fed said Wednesday.
• Even though consumer spending rose, "reports were uneven and suggest growth was slower in September and early October than in August," the beige book stated. The manufacturing and service sectors continued to expand, but growth weakened, mostly for products and services related to home construction and real estate transactions
• Several manufacturing and service firms reported that lighter domestic demand was offset by strong sales to global markets. The weak dollar has been benefiting U.S. exporters.
• Additionally, contacts in several industries indicated a "higher-than-usual degree of uncertainty about the outlook for economic activity," the beige book said.
• Fed policymakers will next meet to discuss rates at a two-day gathering set for Oct. 30-31, and the beige book could heighten the chance of another reduction.

Again, none of this is new - all points discussed in this blog for months. But I guess its a 'surprise data point'? still to the market. Today's reports from Coke, United Technologies, et al keep pointing to the same thing that Intel, Yum Brands, PepsiCo are all saying - US was fine this quarter but we are not so sure going forward, foreign markets esp. Asia booming. Great for multinationals but the other 85% of US companies? Not so good. This is why my short is in the Russell 2000 instead of S&P500, although markets tend to move together.

So it looks like we are going to go through another cycle of this dog and pony show. Credit conditions weakening, drumbeat for cuts, a roar from the market as the latest cut "will fix everything" (just like the last one did - not), rally, than a look at realization of the situation. I think as each dose of 'crack' (Fed cuts) hits us, they will have less effectiveness. At some point people will look around and say .. ok... these cuts aren't really helping the domestic economy. When that point is, I have no idea. Until then, party...

On to earnings - I don't follow all this companies closely but just from residual reading and osmosis I will give you my take on what we might see tomorrow.

1. First, big pappi Google (GOOG) - I suppose my theory (shares by others) from late August that Google might only 'meet' or 'beat a little' due to loss of customers in the financial sector (who advertise like mad for their mortgage products) could slow down results a bit - has been ignored. Google also has been doing a massive hiring binge so I suppose they could goose results simply by hiring less people for a quarter. No matter the number, the reaction is what is important. A positive view will give confidence and a negative view will give major pause. I can't think of a more psychological stock other than Apple (AAPL) at this point. I compared the two back in September, and while owning both, and bullish on both in the long run, I have a lot more confidence in spectacular results from Apple over Google. However, these 2 are intertwining themselves in all aspects of our lives and I expect to continue to post long term stock gains. Apple reports next Tuesday I believe and I will definitely be less "short exposure" going into the Apple report as I believe they have the potential to have a 'game changing' type of quarter. Remind me to buy some Apple before then. ;)
2. Bank of America (BAC) - yawn, I suppose it is important but its going to tell us the same story JPMorgan just did i.e. Citibank sure sucks; we have some bad exposure but at least we are not Citibank. If Google comes through, people won't even notice BAC. If Google does not come through they will point to Bank of America's bad results... blah blah.
3. Capital One Financial (COF) - I am just curious to see how much American consumers are leaning on their credit cards - in Wells Fargo report yesterday a very interesting point, supporting what I have been highlighting (no house ATM, to the credit cards we go American consumer!)

   The company reported that an increased usage of customer credit and debit cards resulted in fee income growth of 21% from third quarter 2006 and 34% annualized on a sequential basis. These numbers were driven by a 20% increase in purchase volume and a 27% increase in average balances from a year ago.

4. Gilead Sciences (GILD) - ok I don't usually touch medical/biotech stocks but gun to head this is the one I'd buy.
5. Intuitive Surgical (ISRG) - never held this one in the fund portfolio since its had a massive run, but a classic growth stock I've had in my own portfolio from time to time over the years. From best I can tell (I don't watch it that closely anymore) it has had a massive run and not sure what else good news could be out there at this valuation - could be a sell on the news reaction. Momentum traders love this stock.
   
6. Nokia (NOK) - another bellweather - I don't follow it closely but it seems to be hitting on all cylinders and is 'best of breed'.
7. Nucor (NUE) - always interested in hearing the steel story since the wind beneath our wings is 'global growth'
8. Robert Half International (RHI) - large company that directly ties to US employment. Forget the dumb government reports that get revised 27x, what are the companies who actually PLACE employees for a business saying?
9. Sandisk (SNDK) - previous fund holding - it has been quite washed out - curious to see what it says; the stock price has been telegraphing not so good results.
10. Sunpower (SPWR) - this extremely highly valued US solar power company - lots of things of interest to me here - sales, ASPs, sourcing of polysilicon, and my key in this sector gross margins - these stocks have run so much that most are priced to perfection - will there be a sell the news reaction? And will it affect the rest of the sector?

Whew a busy day tomorrow that will give us insight into many parts of the economy. But again, in our narrow point of lemming view as humans... we will probably all only focus on Google tomorrow and if its good, all other bad news can be ignored, and if its not good "enough", than all other bad news will be highlighted.