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Market Wrap-up for Jan. 27 - The Real Blizzard on Wall Street

Needless to say, the #Snowmageddon of 2015 was surely a bust – meteorologists apparently took a page out of the econ textbook, with predictions being off by several feet of snow. And while the blizzard was not as bad as many feared, the real “storm” hammering Wall Street has been several surprisingly sour earnings reports.

Missing the Mark

In just the last few days, several big-name companies announced troubling results for the fourth quarter, and many of which also gave lower forecasts for the upcoming quarter and year:

  • Caterpillar (CAT ) missed EPS estimates, reported falling revenues, and slashed its FY2015 revenue estimate to $50 billion.
  • Du Pont (DD ) managed to match EPS estimates, but fell short on sales. The company also lowered its annual earnings estimates.
  • Lockheed Martin (LMT ) posted lower earnings, but managed to beat revenue estimates.
  • Procter & Gamble (PG ) announced lower earnings and revenue from a year prior, which were well below expectations.
  • Microsoft (MSFT ) managed to beat revenue estimates and match EPS, but the company guided well below the Street’s expectations for 2015.

Earlier in the season, many of the big banks reported worse-than-expected results, including Morgan Stanley (MS ), Bank of America (BAC ), and Citigroup (C ). The lower forward guidance announced by a number of companies is also troubling.

A Red Flag for the Labor Market

Making matters worse, several large companies have announced significant cuts to their labor force:

  • IBM (IBM ) will cut over 110,000 jobs.
  • American Express (AXP ) will let 4,000 workers go.
  • Baker Hughes (BHI) will lay off 11% of its workforce.
  • Halliburton (HAL ) will cut 1,000 jobs.
  • Coca-Cola (KO ) will reduce its workforce by 1,600 to 1,800 employees.
  • Schlumberger (SLB ) will lay off 9,000 workers.

While many of these companies are scrambling to cut costs due to the massive slide in oil prices, some of these firms are cutting back for more troubling financial reasons. One trend that has emerged among analysts is that more job cuts are expected in 2015 – banking is just one of the sectors expected to reduce its labor costs.

Tough Times Ahead?

The disappointing results from several big-name companies combined with the news of job cuts has many investors understandably worried about the outlook for 2015. As we’ve mentioned previously, many factors will come into play this year including corporate performances, diverging global monetary policies, the housing market, a stronger dollar, weak wage growth, and now a red flag for several corners of the labor market. Earnings season, however, is not yet over – we’ll be sure to keep you updated with the latest earnings news as it comes in.

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