Intel and JPMorgan Stocks Discount Better Earnings - 01/15/10

There is a glaring upside to first-quarter 2010 corporate profits (up 100% year over year) and first-quarter 2010 GDP (up 4.5%). It grows clear that, owing to continued draconian cost cuts, coupled with a series of positive economic releases and a long list of company profit guidance increases in mid to late January and early February, there is a very large upside to first-quarter GDP (up 4.5%) and, even more important, to S&P profit growth (which doubles!). The upside on both counts is in sharp contrast to more muted growth expectations. While corporate managers, economists and strategists raise earnings per share, full-year growth and S&P target estimates, surprisingly, the U.S. equity market fails to respond positively to the much better growth dynamic, and the S&P 500 remains tightly range-bound (between 1,050 and 1,150) into spring 2010.

-- Doug Kass, "20 Surprises for 2010"

The next week will be a big test and will give us a sense as to whether stock prices have begun to fully discount better-than-expected reported fourth- and anticipated first-quarter earnings, which was my principal surprise for 2010 (above).

I believe this will be the case.

Intel (INTC) and JPMorgan Chase (JPM) are the first important reads, and thus far, both stocks, after experiencing better-than-expected results, have seemingly discounted the better profit news.