Wait for context on this week's earnings
Don't ascribe too much importance to these few early reports. Alcoa, Intel and JPMorgan aren't everything.
It's not the earnings season, it is the silly season, or at least the beginning of it. Because so few companies report this week, their power is way overstated. Alcoa's (AA) "weakness" meant there was industrial weakness, and all of those stocks got hammered.
But then we looked deeper into Alcoa and found the cash flow bountiful, and the businesses it is levered to -- autos, aerospace and industrial gas turbines -- are all about to have turns in 2010. We switched directions, and now it is going higher, even though we heard about that "crummy" quarter for a 24-hour news cycle.
Today is Intel (INTC). Bated breath. Some are looking for the holy grail of 64% gross margins -- huge by the standards of almost every other company imaginable -- but that means that 64% won't be enough, and there is no way they can do more than 64% because they haven't done it historically.
So in the midst of a bruising worldwide recession, if Intel doesn't blow out the margins and guide up big, tech will get blown away Friday.
Yet in a week we will have heard so many earnings reports that no one individual report will matter. The magnification of Alcoa, Intel and then JPMorgan (JPM) on Friday is totally ridiculous, especially as we try to take our cue from the action in the stocks, which may be heavily influenced by expiration.
So we end up with a series of false tells that we trade on because we don't have much else to retreat to, except headlines like banker fees and some upgrades or downgrades.
That's why my suggestion is to be no more hair-trigger on Intel than on Alcoa. I am betting that 80% to 90% of the people who "traded" or took their cue from Alcoa didn't listen to the call. They couldn't have; it was that good.
Don't do the same with Intel. And put it in perspective: This company used to be a cash machine, a veritable ATM. Do not hold it to a standard of 64% gross margins and then boot it if they are at 61%.
I bet that by Wednesday or Thursday, in the fog of earnings, if it does 61% it will be much higher.
At the time of publication, Cramer was long Intel and JPMorgan.
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