January 12, 2010 - Earnings reports started. Alcoa came out of the box a little shy of what investors wanted, and according to commentary, sent the stock market into a spin. Hard to believe one stock report could do that. The same day, the U.S. trade deficit was announced, showing that our still strong need for oil imports exceeded all of our exports. The deficit widened, again. That contributed to the weak trading day. But Alcoa's report was a factor.

They have a pretty good chance since the last qaurter of 2008 saw large write offs and charges. Huge losses were taken. It was the middle of a messy economy that was still struggling to find a bottom. When comparisons are made, 2009's last quarter should look pretty good. All the charges were taken in past quarters, setting up better reports in the future.

But there's a wrench in the works: the unemployment report last week. It showed 85,000 jobs were lost, many more than anyone anticipated, especially the politicians. Suddenly there's a new job number one: make more jobs. But the government can't make jobs, even if it prints checks to pay people. Those jobs aren't real. They're not sustaining because there is no demand pull for the services those jobs create. If there were, the private sector would supply them. If the government wants to create jobs, it has to allow businesses the means of creating jobs. Translation: taxes need to come down on business in order for that money to be paid to workers for jobs that produce a good or service that people want.

How does that impact this quarter's earnings? By planting the seed that things aren't quite as good as we all hoped they were. That unemployment number was the first increase in many quarters. There was hope that the trend of fewer job losses would continue, maybe even a possibility of some job gains. Didn't happen. Now investors are beginning to think that maybe the economy isn't bouncing back quite as quickly or as strongly as previously thought (hoped). That translates into the natural deduction that earnings may not be as robust as anticipated. That means some investors sell.

Don't be surprised if many companies miss their marks when it comes to this quarter's earnings announcements. Analysts and investors have embedded their high estimates and higher hopes into stock prices. They want to believe better earnings were achieved. For some companies they will be. Others, like Alcoa, didn't make estimates.

Anxiety has crept back into investors' psyche. It's not fear yet, but this earnings report will go a long way to quell it or stoke it. Watch earnings carefully, especially compare them to estimates. Any stock that falls short will get hurt because the hope that the recovery is finally, truly beginning has been greatly reduced.

The future isn't as bright as we thought. New numbers, such as unemployment and the trade deficit, aren't adding to the plus side. They're causing new worries. We'll need more large companies reporting better than expected results to turn the tide. It's going to be an earnings season to remember.

- Ted Allrich