Yes, Alcoa does still matter
- Joshua M Brown
- January 9th, 2013
Yesterday on CNBC I mentioned that Alcoa is still somewhat of an important barometer for the broader markets, even if a somewhat diminished one given its relative size versus the rest of the Dow stocks. Everyone on the show yelled at me that it's irrelevant.
OK, sure, but what does the data say?
Alcoa Inc. could be a harbinger for the stock market’s next move.
The aluminum producer kicked off earnings season last night with a relatively in-line fourth-quarter report. The company swung to a fourth-quarter profit largely due to cost-cutting efforts. Shares edged higher in after-hours trading.
If those gains hold through today’s closing bell, that potentially bodes well for the market’s next move over the next few months.
Since 2005, when Alcoa shares have risen after the company releases earnings, the S&P 500 has averaged a 1.9% gain over the next month of trading, and a 3.2% gain over a three-month timeframe, according to Schaeffer’s Investment Research.
Conversely, when Alcoa’s stock price drops after earnings, the S&P 500 has averaged a 0.6% decline in one month and a 0.09% drop over the next three months, Schaeffer’s data show.
For what it's worth, Alcoa (AA) is currently up a half a percent after a pretty good report last night.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.