Will Markets Accelerate After Alcoa’s Lead?

Index ETFs declined ahead of the Alcoa (NYSE:AA) earnings report, the unofficial start of earnings season

factory, alcoa, NYSE:AA, earnings seasonIndex ETFs declined Tuesday as investors awaited the unofficial beginning of earnings season.  The SPDR S&P 500 (NYSEARCA:SPY) lost .29%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) lost .34%, the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) lost .2%, and the iShares Russell 2000 Index ETF lost .07%.

Earnings season has now unofficially started, with a better than expected Alcoa (NYSE:AA) Q4 2012 earnings report.  The aluminum provider saw a 4.6% gain in Q4 2012 compared to Q4 2011, and saw an overall profit decline of 1.2% for the last quarter.  Lastly, the company reported a $242 million profit in 2012 compared to a $191 million loss the previous year, and projects a 7% increase in global demand for 2013.

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So, with Alcoa (NYSE:AA) out of the way, perhaps Wednesday’s markets will react better after Tuesday’s jitters…

With Alcoa (NYSE:AA) moving up in after hours trading, it is still unclear how investors will react to this year’s first earnings season judging from Tuesday’s market action and the mediocre sentiment.  Perhaps we are seeing a small correction after last week’s relief rally.  Either way, we will likely see higher prices tomorrow, unless of course this earnings season turns completely sour.

Certainly Tuesday’s NFIB Small Business Optimism Index will hamper investor attitude towards the economy, as the report stated  that this past month was “one of the lowest optimism readings in survey history”.

Bottom Line: Markets shrunk today in anticipation for the unofficial start of earnings season; Alcoa (NYSE:AA) beat expectations.  The remainder of earnings season will no doubt have an impact on markets, and markets just might be going through a minor correction after last week’s relief rally.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.