NEW YORK ( TheStreet) -- First-quarter earnings season begins like all others with the report from Alcoa ( AA ) after the close today. Improved auto sales could help the company, but the global economic slowdown and sequestration spending cuts could be a drag on Alcoa and the basic materials sector.After Alcoa, earnings shifts to consumer spending and on Wednesday we get reports from one consumer staples company and two retail-wholesale companies. Two of the three have buy ratings according to ValuEngine. The earnings report I am watching on Thursday is a sell-rated trucker from the transportation sector I have been warned about.
Friday premarket two of the four "too big to fail" banks report quarterly results and I will cover them in a special update on the big banks on Thursday. The basic industries sector which includes Alcoa is the only undervalued sector, undervalued by 6.4%. It is also the weakest sector, down 4.0% month to date and down 31.1% overall over the last 12 months. The sector consists of 418 stocks with only one rated strong buy, 12 rated buy, 129 rated sell and 50 rated strong sell. This makes it difficult to pick winners in this sector. The consumer staples sector is 16.2% overvalued but out of 267 stocks, 130 have buy ratings with only ten rated sell and 4 rated strong sell.
The retail-wholesale sector is similarly configured with an overvalued reading of 14.0%. This sector contains 358 stocks with three rated strong buy, 232 rated buy, and just 20 rated sell and two rated strong sell. Tomorrow I will profile several retail-wholesale stocks that should outperform the market and outperform discretionary and staples stocks.