Bear Market Earnings

“Historically, losing money is a bad thing. But now, if you’re losing less money, it’s a good thing.”

Kris Niswander, Associate Director of Financial Institutions at SNL Financial

The market delivered a helpful reprieve before the Good Friday holiday. Climbing on Wednesday and breaking short-term resistance on Thursday, the charts might suggest we’re in for more positive weeks ahead. If only the market were built on charts and indicators it would be much easier. But alas, it is not. Mr. Market is subject to whims and fancies of Mr. Press – and Mr. Press is ready for his say.

This week brings the first big batch of 1^st quarter earnings for Wall Street. Expectations are grim as big firms like Johnson & Johnson (JNJ), General Electric (GE), and Intel (INTL) show how they weathered the first three months of 2009. Even more important, they’ll provide guidance on what they expect for the next few months and quarters. If you’re interested, check out Earnings.com for a full list of who’s announcing and when.

Things are not looking good. On the financial side, Goldman Sachs (GS), Citigroup (C), and JP Morgan Chase (JPM) are set to announce. C is now a $3 stock. As such, it could jump 50% or lose 50% depending on what traders have for lunch on Friday. Right now the Street expects a -$0.37 loss. This is not what Citigroup implied on March 10. Last month Citigroup said they were profitable for January and February. I’m not sure what happened in March, but C’s accounting seems a little strange.

Then there’s the so-called “Blue Chips” – those stocks seem especially blue in recent months. Health care giant, Johnson & Johnson (JNJ) expects earnings very similar to last year’s – expected EPS: $1.22 vs. last year’s: $1.26. Since health care tends to weather downturns better than other sectors, it’s not completely surprising, but this downturn has been especially acute. Tuesday will tell us how JNJ, and thus health care is faring in the first part of 2009. Other Blue Chips aren’t faring as well.

Earnings are especially important this week because of the recent five-week run in the market. If the market sustains momentum, it could bode well for the indexes. But if it’s just another Bear Market head fake, then hold onto your hats. Last quarter may turn out to be the 7^th in a row with negative year-over-year earnings. In addition, it could be the first time since 1998 when all ten economic sectors in the S&P 500 post year-over-year losses. Betting on a rising market may be a bit premature.