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Wednesday
Aug042010

Earnings Season in a Word: Amazon.com

DateWednesday, August 4, 2010 at 09:51AM

While there are still another couple of weeks remaining to the current earnings season, it will be hard for a company to beat the headfake that AMZN's stock gave in its initial reaction to earnings.  On July 22nd, the stock reported disappointing earnings and sold off hard in after-hours trading.  By the next morning, AMZN's stock opened down 12%, erasing $5 billion in market cap.  Within minutes of the first trade, however, investors rushed into AMZN and the stock regained nearly all of its lost ground from the initial downdraft.  Today, the stock is not only higher than it was then, but it is trading at six-week highs.

AMZN's reaction to earnings pretty much sums up the entire market's performance this earnings season.  As many investors will remember, the reporting period kicked off on a negative note even though most companies were beating on the top and bottom line and guidance was strong.  At first the strong reports were considered outliers as investors chose instead to focus on the 'warts' like Bank of America (BAC), Google (GOOG), and IBM.  But after several days of consistently strong reports, they could no longer be considered outliers, and investors were forced in to the market. 

With less than two weeks remaining in earnings season, bulls will need to see a continuation of this trend in order for the market's strength to hold up.  Bears, on the other hand, will want to see earnings season end on a bad note as now more than ever, the market focuses much more on the here and now than on longer term trends.  So even if this earnings season remains strong overall, the sentiment that investors take from it into the end of the Summer will likely be based on the results we see in the waning days.

   

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