We have already had a bias or tone get put in place for earnings season today after a disappointing report from Alcoa (AA) and a disappointing outlook from Chevron (CVX). The difference here is that there were higher hopes for Alcoa, and the problems occurring inside Chevron should have been known based on a steady confluence of weekly data from the government. Two more major earnings on deck to watch are Intel (INTC) and JPMorgan Chase & Co. (JPM). This is effectively the last week for many companies to raise or lower guidance, and that effort has made several sectors come under a bias.

Alcoa (AA) lost $0.27 or made $0.01 on a pre-itemized basis versus Thomson Reuters estimates of $0.06 EPS. The good news is that revenues were above estimates, and that has probably kept a 5% drop from Monday night and Tuesday morning from getting worse than the 10% drop by today’s early afternoon. You just have to consider that Alcoa had rallied more than 200% off of last year’s lows and had risen almost 75% since the end of last summer. 

Chevron (CVX) was a surprise warning. If any investor hates one type of earnings warning, it is an earnings warning coming out of the major integrated oil stocks. That sets the tone for a sloppy slate of earnings from the middle-tier sectors and from the juniors to the point that it confuses investors. After all, many still feel that big oil companies dictate oil prices. If that were true, wouldn’t they then get to dictate their profits as well? It turns out that the conspiracy theorists have a hole in the story, at least on the refining side.  Chevron complained that its refining margins in the last quarter were lower than they had been for all of 2009. Ouch. That sets a very negative tone for Valero Energy (VLO) and other refineries, although much of this refining weakness could have been seen in the weekly Department of Energy data showing many weeks where refining capacity was under 80%. 

Intel (INTC) is on deck for Thursday afternoon and is the big technology sector earnings to watch this week. Because of the old Win-Tel alliance belief, this earnings report is likely to have a direct spillover into Microsoft (MSFT). It will also have a big impact on the broad chip sector, particularly the Semiconductor HOLDRs (SMH) because of a near-23.5% weighting in that key ETF. Thomson Reuters has estimates of $0.30 EPS and $10.16 billion in revenues for its fiscal quarter. If those targets are met, then Intel’s 2009 fiscal earnings will look like $0.67 EPS and $34.71 billion in revenues. That gives it a trailing P/E north of 30-times earnings. The estimate for 2010 is $1.50 EPS based upon a recovery and on a continued strong PC market, giving it a forward P/E ratio of about 13.5-times earnings. The stock sounds expensive in the rearview mirror look, but sounds cheap on a forward 2010 outlook. Based on estimate changes, these figures may adjust slightly in the next 48 hours before the earnings report actually hits. As a reminder, this report will be different than in the last as Intel is reporting under its new organization model rather than its old structure.

J.P. Morgan Chase & Co. (JPM) has been under some market pressure today, but there is also financial services pressure now that a new round of pay scrutiny and blame for the financial crisis is coming back out of Washington, D.C. Frankly, at this point, that might just be a diversionary tactic to keep the focus off of many new policies not being anywhere as strong or as effective as some of the election promises might have led many to hope for. Thomson Reuters has estimates at $0.62 EPS and $27.02 billion in revenues.  The bias seems to be that the bar is set low but that the nation’s safest bank is not expected to have blowout earnings. A “steady as she goes” attitude here is likely to be good enough, but what will not be tolerated is a further deterioration of credit. Weakness is expected, just not more credit metrics weakness than what we saw last quarter.

There is a wild card in the technology earnings season today, and that comes from Linear Tech (LLTC). This is not usually a market-mover, but with it being the first to report, it could have a larger impact than what investors might normally expect.  Its “investor twin stock” had been deemed to be Maxim Integrated Products (MXIM). Linear is within 3% of its 52-week high, and Maxim is about 10% under its 52-week high. Both companies have very similar market caps, yet Maxim is about 80% more in expected revenues. Thomson Reuters has estimates of $0.31 EPS and $27.05 million in revenues for the last quarter.

So far, we have seen nothing unexpected from KB Home (KBH) in its post-earnings reaction. The company had the same sort of tax benefit Lennar (LEN) saw last week when it posted a gain. KB also had a small gain in net earnings after the item this morning, but orders disappointed. Normally we’d give more detail, but this is just a rearview look, and is effectively one of the last companies to report in the sector as homebuilders had a quarter-end of November rather than December. The surprise here is that Beazer Homes (BZH) is not down more than 2.5% today based upon its massive run-up last week after its secondary offering share weakness was bailed out by Lennar.

Aetna (AET) is a bit of a surprise in its guidance today, and it has just put a cloud on other health insurance stocks. You have heard of Obamacare, so this should have not been such a huge surprise considering how these insurance firms, that are deemed to be survivors in the health insurance sector, are trying to keep a cap on their renewal rates. The company’s filing showed that it still expects to post $2.75 EPS for 2009, and that “slightly less” would be under the $3.09 EPS expected from Thomson Reuters for the fiscal-2010. Three major competitors now under a semi-dark cloud that have also recently challenged new 52-week highs are UnitedHealth (UNH), Wellpoint (WLP) and Humana (HUM).  

Just don’t bother lumping all aspects of insurance together. Hartford Financial Services Group Inc. (HIG), a property & casualty insurer and financial services provider, raised its guidance significantly. It is actually having less of a positive halo-effect on P&C companies due to a perceived notion that each P&C insurer has more of a difference in earnings from firm to firm compared to health insurers.

So far, the earnings season is off to a slightly negative start. The caution in using today’s data is that some of this data should have been known and some may not exactly be a “tell” for the rest of the companies reporting. Either way, all you have to really worry about is which stocks have run up the most. If you are worried about stocks reporting this week and next week that have run up well over 100% since last year’s lows and are up significantly since the end of last summer and that continued the run in the last quarter, then you just need to look for the ones you have some worries about for lackluster earnings reports due to continued macroeconomic issues. Of course that is the hard part, but with the VIX this low, it is in theory at least cheaper than normal to buy downside protection for protecting serious gains via PUT options.