: Beware of the Fed potentially failing to ease in line with market expectations -- whether in language, amount, or at all -- and of China possibly failing to prime its economic pump to a stronger degree. In this scenario, Alcoa's so-so fundamental story -- despite the CEO selling it hard on the second-quarter call -- would be exposed amid the unwinding asset-reflation premium. Hmm. Separately,
(MCD - Get Report)
August sales were cheered. That didn't take much, considering the company's weakening fundamental trends of the past two quarters.
: Overlooked in this glorious news was the fact that U.S. sales were roughly in line to consensus and that Europe missed, in spite of increased investments in value and marketing. In fact, I'm wondering about profit margins in this type of month. With these investments set to spur same-restaurant sales into a slowing global growth environment that should favor trade-down, shouldn't McDonald's' numbers have packed punch? Hmm.
Things You Are Missing in the A.M.
- As far as I am concerned, Texas Instruments' (TXN - Get Report) mid-quarter update supported early-inning warnings from companies, and shouts, "the global economy is in limbo and at risk of downside surprises." Specific areas of concern included, first, "timely actions" to reduce costs. This implies weaker-than-expected demand will be around for a bit, and that management does not want to miss on another quarter. The second worry is that most orders are tracking below mid-range of expectations. A single part of the business, wireless, is holding the company afloat, instead of broader strength.
- The Fed is likely to cut its economic forecasts Thursday to justify fresh easing. How does that play in the election? President Obama has been surging in the polls of late, but reduced targets from the Fed once again -- led by a person the president reappointed -- could be a benefit to Republican nominee Mitt Romney. Watch oil-related stocks for a bid. By the way, do you even remember what the Fed did with its growth targets months ago? Here's
- Be mindful of the architecture of easing: If the Fed just buys Treasuries , leaving out mortgage-backed securities, there will be disappointment.
- Reiteration: Retail stocks are looking too toppy for my tastes, especially into the slow months after the back-to-school season and before the holidays. I have no bones to pick here in putting on a short in Decker's Outdoor (DECK).
This is a weird environment to be investing. It has a strange feel -- no attention is on corporate sales and earnings, and new incoming information is painting a worrying picture. I continue to lean more bearish, but I do acknowledge the backdrop presents opportunities on the long side. After all, negative company-specific news and the "Fed easing priced in" manta are not sparking mass sector selloffs, nor defensive behavior in trading.