Mother Merrill Cuts the Cord

Earnings season continues to unfold, bringing surprises both positive and negative. Today the headlines belonged to Merrill Lynch (MER) which posted its third consecutive quarterly loss and wrote down about $6.5 billion in loan losses. Gross revenues for the first quarter fell 69% from a year earlier. In time-honored Wall Street tradition, 3,000 Merrill Lynch employees volunteered to fall on their swords to appease angry shareholders. OK, they didn’t exactly volunteer. They are, however, now looking for new jobs, as are another 1,000 Valued Team Members who were downgraded to “subprime” status earlier this year. MER shares rose nicely in response.

Energy and basic materials led a monster stock rally on Wednesday. With little follow-through today, it is difficult to judge the significance of the gains. It was encouraging to see the index benchmarks find support well above the bottom of the recent trading range. We still don’t have a breakout, though. This suggests more choppy action may be ahead. Google (GOOG) had a surprisingly positive earnings report after the close today, setting the stage for another upward move tomorrow.