Intel Report Chips Away at Case for Bullishness

BOSTON (TheStreet) -- Intel's(INTC Quote) third-quarter financial results may have beaten expectations -- even its own -- but the numbers themselves tell a different story.

Intel, the largest U.S. chipmaker, said yesterday after the stock market closed that revenue rose 18% sequentially, its strongest second- to third-quarter growth in 30 years. But revenue declined 8% from a year earlier, and net income dropped by the same amount. Just as bulls were quick to spin Alcoa's(AA Quote) marginal profit into a confirmation of a lasting U.S. economic recovery, they're now exaggerating the implications of Intel's performance.

Stocks are rallying even though companies have been reporting declines in revenue and earnings. In the case of Intel, optimism is somewhat warranted since the company exceeded expectations. But an examination of its geographic mix pokes holes in the recovery proposal.

Intel derives 57% of its revenue from the Asia-Pacific region, which witnessed a 21% sequential uptick in sales. It gets just 19% of its revenue from the broad geographic area called the Americas, which includes, but isn't limited to, the U.S. Revenue in that region rose 7%.

Concluding that Intel's strong performance is a reason to buy into the U.S. stock-market rally is an illogical deduction. Investors are either failing to comprehend or consciously ignoring the United States' anomalous economic position. The unemployment rate is at 9.8% and climbing. When factoring in people who have stopped looking for work and those who are underemployed, the figure is higher than 15%. And now economists are speculating that many jobs have been permanently lost.