Tags: Kenny | earnings | Alcoa | stocks

Knight Capital's Kenny: Alcoa's Earnings May Be a Tonic for Stocks

By John Morgan   |   Monday, 01 Jul 2013 12:03 PM

Can Alcoa save the bull market by changing the subject? The perennial first company to release earnings may help ease the downcast tone of the stock market by inviting a broader look at the economy, according to Peter Kenny, chief market strategist at Knight Capital.

Alcoa is slated to announce its second quarter results on July 8. Kenny predicted what the company says then will have ramifications far beyond its own individual corporate outlook.

If all goes as he expects with the market's earnings parade that follows Alcoa, Kenny is hoping for "a near-term counter-punch to the volatility and downward pressure" of recent weeks.

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"The real concern is, what have we seen over the last six weeks that will impact guidance in the next quarter?" he told Yahoo. "And I think that's really going to be the story.

"The forward-looking guidance is clearly going to be heavily dependent upon how the consumer reacts to rising interest rates."

Factset reported Wall Street's earnings expectations for stocks have fallen recently, with analyst profit growth expectations for the Standard & Poor's 500 declining to only 1.1 percent from 4.3 percent only three months ago.

Whether the results come from Alcoa, or other bellwethers like Apple or American Express, what Wall Street is looking for is reliable insight, Kenny said.

Kenny predicted a generally benign second-quarter earnings environment.

"I think, in a word, we can comfortably say right now that guidance will be couched in terms of comfort for those who are looking for stability in the markets," he told Yahoo.

Kenny predicted stocks' trailing results will "likely be pretty much in line" with expectations and devoid of "anything massively destructive."

Cliff Asness, co-founder and managing principal of AQR Capital Management, says investors need to relax.

"The preponderance of evidence right now suggests a return to more a normal market environment," Asness told Fortune. "I would bet on that, and I am with my own money."

Asness, who has $80 billion under management, believes that the recent turmoil in the markets will end.

"There is absolutely no reason for this to continue. There is no liquidity crisis or big unwind. This is not 2008."

Asness disagrees with those who see too much leverage or say Wall Street dealers won't support the market because of new regulations.

"Markets are functioning well," he noted.

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