Alcoa Inc. Up and Down
US Stock traders might want to think twice before acting following the International Monetary Fund’s estimate slash for US economic growth. This led to a general plummet in stocks – such as Alcoa Inc. – yesterday at closing. However, the company did have some good news having a first quarter profit on “higher aluminum prices and improved sales.” Analysts claim this was likely due to a “weaker dollar and higher energy and raw materials cost.” In addition, its reported earnings for January-March were a staggering $308m, even more significant given its $201 m LOSS a year ago. Still, it wasn’t all good news since its shares did drop 18 cents to $17.74 yesterday. The company is usually the first out of 30 companies which comprise the Dow average to reports earnings every quarter.
Corporate Profits Concerns
One concern traders are having is how higher oil and food costs will impact corporate profits. Once the IMF claimed higher gas prices may slow down “the pace of the US economy and offset a boost from the Federal Reserve’s bond-buying program,” stocks took a downward turn. But there have been increases in other areas, such as the Dow Jones industrial average which went up 1.07 point, closing at 12,381,11. Although it wasn’t great news for energy companies that dropped 1.9 percent. Nasdaq also lost 0.3 percent.
It is hoped however, that corporate earnings in general will exceed expectations for the ninth consecutive quarter. While that of course would be great, there are other matters of concern such as high oil prices and “an aftershock that struck Japan on the one-month anniversary of the March 11 earthquake and tsunami disaster.”
Price of Recovery
So there has been a recovery of sorts, that’s for sure. However, this has come at a price since there has been significant job losses as well as other costs that have impacted the average man in the street and his pocket. Yet it does look like there will be more revenue growth during this earnings season, with over 30 percent of companies possibly reporting a revenue growth of “at least 10 percent,” according to Howard Silverblatt, S&P senior index analyst. So it is a bit of an ebb and flow situation. But in an attempt to really try to make it, companies are now taking stock and looking to make deals such as the purchase of American Medical Systems Inc. by Endo Pharmaceuticals for around $2.6 bn., “a premium of 34 percent.” As well, Level 3 Communications bought Global Crossing Ltd., which skyrocketed 69 percent. This “all-stock transaction is valued at about $1.9 bn.
Stock Exchange Souring?
The stock exchanges are currently in flux. There has been a peak in the “struggle to control NYSE Euronext Inc.” but NYSE parent company still rejected the $11.3 billion bid put forward by Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. straight out. NYSE Euronext is insistent it will be “sticking by its $10 billion deal to be acquired by Deutsche Boerse, a German exchange operator.” This despite NYSE Euronext drop of nearly 3 percent.
So it’s up and down, ebb and flows, clearly in flux. Like with any full-scale recovery, it is going to take time. The whole world has been impacted by not only what happened in Japan, but the general economic crisis and caution cannot be thrown to the wind. Slowly, slowly though, things will pick up even when other things struggle temporarily. It’s about taking things one step at a time and realizing extreme action isn’t the answer as the world tries to get out of the emergency lane once and for all.
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