The Financials Pit Review

For the week of October 5th, 2009

By PitGuru Frank LaMantia

S&P & Currencies

This week will have a focus on earnings and most investors are focused on the direction the market may turn. Last week saw a decent sell off following the employment numbers and weak GDP forecasts. Forecasts are now suggesting retailers may have a tough holiday season. Currently, the S&P is trading lower with a possible wide trading range because intraday last week it did trade down to 1010. On the up side there is little resistance and on the down side there is small resistance at 1000. I have a serious problem with earnings last quarter! First off, most of these companies laid off workers or sold arms of their business to shed debt. Does this mean they were profitable? No, this means they used tactics to show positive numbers. Saving money does not mean your company is profitable. I want to see earnings because people, businesses, or governments bought your products. Don't be fooled by earnings in a time where weak economic data has showed the recovery will take longer than expected. On a side note the toxic assets that are being bought by Alliance Bernstein, BlackRock, Wellington Management, Invesco, and TCW Group is a little annoying. Sure, let's give the people that shorted the market and ran it into the ground an opportunity to make billions. Let’s break down earnings for this week.

Monday October 5th, Mosaic (MOS) and RPM International (RPM) will post earnings. Expect RPM to announce fiscal earnings to be .45 in the morning and after the bell Mosaic is expecting to earn .35 per share. Tuesday Oct. 6th all eyes will be on Yum Brands Inc (YUM) as it is expected to earn .58 per share on the market close. This company is made up of Pizza Hut, Taco Bell, and KFC and may give traders and the public a possible view of consumer spending habits. Are people eating at home or spending disposable income to dine out? Don't forget about Pepsi Bottling Company (PBG) will be a morning announcement and is expected to have an EPS (or earnings per share) of 1.05. Wednesday Oct. 7th should be a rather exciting day because Monsanto Co. (MON) and Ruby Tuesday (RT) will report earnings before the market open. Monsanto is expected to have an EPS of 0.01 and Ruby Tuesday to be 0.9. On the close Wed., Alcoa Inc. (AA) is forecasted to be down -.12. Many Wall Street companies consider Alcoa to be the heartbeat of economy and will be waiting for the company's earnings. Let's not forget about Costco (COST) which is not sure if they will showing earnings before or after the close but their EPS is forecasted to be .76. Thursday Oct. 8th has Marriott International (MAR) announcing earnings before the open and their EPS is expected to be .13. This is a sector which may struggle due to the recession. Less people are vacationing let alone spending money for an upgrade in nice hotels. Pepsi’s (PEP) EPS is forecasted to be 1.02 and did not give a time for its announcement. Friday Oct. 9th Cantel Medical Corp’s (CMN) EPS is expected to be 0.22 at the open. This company offers sanitizing and filtration equipment for both the healthcare industry and other sectors of the market.^1,2

The U.S. Dollar Index is trying to gain steam and showed strength last week. Currently at 76.74 and in my opinion poised to move upward near the 80 level. Though many would disagree, I feel the market has a good chance of selling off which may cause the dollar to advance. I also wanted to touch on treasuries and the fact that the 10 year is presently yielding 3.179 - which if you do your homework may seem a little low. In this environment anything is possible, but it is hard to see yields going much lower.

¹http://biz.yahoo.com/research/earncal/today.html
²http://www.bloomberg.com/markets/stocks/movers_index_spx.html

Past performance is not indicative of future results.

***chart courtesy Gecko Software