Disappointing market action on positive earnings reports from several companies today, makes me more bearish. The upside may be limited from here if the market cannot rally on good news. I thought the economic data was disappointing, but not weak enough to concern me that economic growth is slowing much below 3%.
The disappointments from McDonald's (MCD) and UPS were execution related and not a signal of economic weakness. Reports for GE, Skyworks (SWKS), Starbucks (SBUX) and Honeywell (HON) were all very strong. This is the most important data today. So why didn't the market react? Maybe it's just priced in all the good news. What will happen when we get a weak report? A lot more than a 0.5% selloff. Good news + weak market = sell.
Michael Grove, CFA