Stocks closed lower on Monday as traders grew nervous about the start of the Q1 earnings season — set to be the weakest result since 2009.
Alcoa Inc (NYSE:AA) kicked things off after the close with a big revenue miss: Sales of $4.95 billion fell short of the $5.27 billion analysts were expecting. Aggressive accounting gimmickry helped pro-forma earnings of seven cents per share (or $108 million) beat expectations for a two cent loss. Management continues to focus on headcount reductions and other expense cutting measures.
Even still, adjusted operating profit margin fell to 16.4% from 18.7% last year. On a GAAP basis, which removes much of the accounting shenanigans, earnings per share were just $16 million or less than penny per share. Expect more of this as the reporting season rolls on. According to FactSet, S&P 500 earnings are set to decline 9.1% from last year in what would mark the fourth consecutive quarter of falling profitability.
In response, stocks are looking increasingly vulnerable here as the Dow Jones Industrial Average contends with massive overhead resistance. Here are three charts to watch: Bank of America Corp (NYSE:BAC), General Motors Company (NYSE:GM), and Citigroup Inc (NYSE:C).
Bank of America Corp (BAC)
BAC shares, like many financial stocks, have been drifting lower as the recent strength in long-term Treasury bonds have pressure net interest margins.
Last week, BofA dropped below its 50-day moving average for the first time since March as the stock’s stochastic indicator flashed a downtrend signal for the first time since December.
Edge Pro subscribers are ready with a position in the $13 BAC puts.
Bank of America will report results on April 14 before the bell. Analysts are looking for earnings of 22 cents per share on revenues of $20.3 billion.
Citigroup Inc (C)
Citigroup, like BAC and other big bank stocks, look ready to resume the downtrend that started last July as the February-March rebound loses steam. The hold above the 50-day moving average looks tenuous at best.
Citigroup will report results on April 15 before the bell. Analysts are looking for earnings of $1.09 per share on revenues of $17.6 billion.
General Motors Corporation (GM)
GM shares tried and failed to retake the 50-day moving average on Monday as the decline off of the March high continues. With General Motors most of April below this key technical threshold, the bears look ready to take another bite out of the share price — potentially putting the February low back in play. Edge Pro subscribers are ready with a position in the April $30 puts.
General Motors will report results on April 21 before the bell. Analysts are looking for earnings of $1 per share on revenues of $34.6 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
