The first week of major earnings reports, other than banks, had some interesting twists and turns.
The bears have been wishing and hoping that concerns about slowing economic growth would be reflected in the news. That was the case with the earnings reports from 3M Co. (MMM) , United Parcel Service, Inc. (UPS) , Exxon Mobil Corp. (XOM) and Intel Corp. (INTC) , but surprisingly strong reports from Microsoft Corp. (MSFT) , Facebook, Inc. (FB) , and Amazon.com, Inc. (AMZN) helped offset those concerns.
On Thursday, the action was extremely chaotic with the big cap "new economy" names driving the Nasdaq higher, but the big cap "old economy" names weighing on the Dow Jones Industrial Average and S&P 500.
It was worrisome action for a market that was dealing with overbought technical conditions and concern that economic issues may start to be expanding. Even the good report from Amazon looked like an opportunity for some "sell the news" action.
Early indications on Friday morning were negative, but then a much stronger-than-expected GDP report hit. This was not expected by anyone and the indices quickly reversed. The bears complained about how the report was distorted, but the market didn't much care.
Market players were expecting negative action on Friday, but they quickly found themselves leaning in the wrong direction and had to reposition. Bears had to cover and bulls had to find more long exposure. The indices didn't have big gains, but it felt like a very positive day because expectations for upside where so low.
Next week, we have more big earnings reports to come and we are going to hear more arguments about how earnings are slowing, but macroeconomic predictions are a very tough way to try to navigate this market.
I have been preaching that we need to stay focused on price action more than anything else. This week was a particularly good illustration of why. It would be very easy to anticipate some sort of market top, but the money making move was to stay with the trend and not overreact to minor signs of weakness.
Have a great weekend. I'll see you on Monday.