Sunday, December 18, 2011

Goldman’s Baby Bump: Traders Greet Earnings With Tame Response

They bought the rumor. They weren’t as convinced they needed to sell the news.

Wall Street got half the conventional wisdom right in the first two days of trading this week: having bet and bet big that it would see the kind of numbers out of Goldman Sachs (GS)that could tamp someanxieties, investorsopted to neither press their advantage Tuesday, nor to retreat from their furthered positions.

Chances are the prospect ofmore earnings – and more-mixed readings – from this same financial group kept the animal spirits in check. The balance of the week promises to bring results out of JPMorgan (JPM)on Thursday, followed by a daily double dose ofBank of America (BAC) and Citigroup (C). JPM has some exposure to consumers, while Bank of America proved to be one of the government’s biggest debtors during the financial system bailout; both behaved quiescently Tuesday. Citi, the other big government creditor bank, added 14 cents, which – due to its sub-$3 share price – represented a 5% move.

So one day after stocks recorded their biggest one-day bulge in nearly six weeks,Wall Street posted another one of the seasonal mites thathave proved so common since Memorial Day: the S&P 500 (GSPC)rose 5 points, or half a percentage point, to 906. Not nothing. Just not much.

Economic data released ahead of the trading session tweaked the investment landscape a bit.Reasonably robust retail sales figures for June,coupled with a sharper-than-forecast swell in producer prices, helped allay some fears that recessionary conditionscontinued to linger in the U.S. economy. But it proved tough to take the numbers at face value, since they largely reflected factors likehigher gasoline prices – who didn’t knowpump prices hadrisen last month? and that they’ve since backed off – and auto sales as exsanguinatedcar dealers depleted their inventories of vehicles.

Sh! ares of Hess(HES)and Valero (VLO)- energy names with gasoline retail exposure- added a little over a percentage point each.

The relatively accommodative economic data and earnings chased some investors out of the Treasuries market, where they’ve been working off their risk aversion, and prompted them to put some money to work. By the end of this week, some 30 components of the S&P 500 are scheduled to have reported results, so investors can take the temperature of corporate profits. But overall, earnings are expected to decline some 35%, and even if the numbers aren’t as dreadful as analysts have been projecting, investors are looking to assay some confidence in the profitability of corporate America.

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