Earnings OK, But Troubles Persist

As traders make their ways through the morass of earnings reports now crowding the markets, the general trend is that companies, for the most part, are beating or equaling estimates, with about 30% failing to make the grade.

With each passing day, more and more companies are releasing earnings, and by Friday, we'll have pretty much reached the midpoint of earnings season.

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There were some prominent companies reporting on Tuesday, with Yahoo (YHOO), Yum Brands (YUM) and Boeing (BA) exceeding estimates, while Ambac (ABK), the monoline insurer of municipal bonds and much of the subprime debt shocked traders with an enormous $5.42 per share loss on $1.7 billion in write-downs, while analysts were seeking a loss of only $1.51 per share.

Shares of the troubled bond insurer traded 42% lower on the news, down 2.57 to 3.46 per share. Ambac had traded as high as 96.10 just last summer but has lost nearly all of its value due to the overwhelming number of defaults and writedowns in mortgage-backed securities and the general overhang from the credit crunch.

With one eye on Ambac and the faltering credit structure and the other on relatively strong reports from mainline stocks, investors were vexed over which direction they should turn, thus, the somewhat uninspired trade on the session.

Dow 12,763.22 +42.99; NASDAQ 2,405.21 +28.27; S&P 500 1,379.93 +3.99; NYSE Composite 9,237.29 +9.32

Declining issues edged out advancers once again, 3499-2765. New lows took the prize from new highs, 264-90.

Trading was led by some big name companies on heavy volume while many smaller stocks - especially on the NASDAQ - were selling off. Since the massive gains this past Friday the markets have been unable to confirm the highs and have since wallowed in a range, seeking direction.

It's difficult to grasp market movements, especially at the height of an earnings season, but this market continues to exhibit signs of weakness rather than strength, but only marginally. Sideways would be the most likely direction for the near term, though a major event or spate of either positive or negative earnings could turn the tide in one direction or the other.

The market's indecision actually may be a boon for traders looking to lock in or get out of positions as we're in a somewhat stable environment for the time being. Of course, that's likely not to last long.

Oil made another new high on the day, gaining 23 cents to $118.30. Gold was slashed $16.20 to $909.00, while silver also lost ground, off 55 cents to $17.28.

There is a good deal of gyration in all markets presently, though the overall movement is a bit like riding around in circles. If anything, the equity and commodity markets are both overbought and a correction to the downside may be in the cards.

NYSE Volume 4,017,958,250
NASDAQ Volume 2,145,000,000