Horseflies, R.I.P.

Monday night's earnings reports, on balance, were the functional equivalent of a carpet bombing for the tech and financial sectors. It was as ugly a night for earnings as we've seen in some time.

The data points were more pronounced in tech, where large holes were blown in a number of the fantasies that have been rampant in that sector. The Goldilocks contingent felt tech was immune to economic weakness and would thus rebound in the second half of the year - though it's tortured logic to think that economic deterioration wouldn't impact tech, but a rebound from that deterioration would somehow impact it positively.

In chronological order: SanDisk (SNDK) suffered a big loss, instead of making money. Its gross-margin growth was zero. It reported excess inventory, which may still increase, even though the company is cutting capital expenditures. That, along with recent push-outs from Samsung, indicate that the party's over for semiconductor-capital equipment stocks died a long time ago -- and also put an exclamation point on the fact that there's far too much capacity, especially in anything related to memory.

Don't Sit Under the Apple Tree

But the bigger news for the bulls came from Apple (AAPL), which guided down rather substantially for next quarter. The company's gross margins appear to be impacted by its need to lower average selling prices in an attempt to keep its growth rate elevated.

Apple was the last of the four horseflies that hadn't really cracked, and was thought to be invincible. (As an aside, the belief that any of 4 consumer-dependent stocks could be bought at any price, because they were "invincible," is as silly a concept as you'll ever see.) So when Apple was splattered for nearly 10% overnight and in the early going, that had to be rather sobering to die-hard tech bulls.

Though they're used to Apple guiding slightly lower (so it can beat the number), they couldn't ignore the impact of last night's report: The luster is fading.

Next, Texas Instruments (TXN), which couldn't even make its recently lowered number, took guidance down pretty substantially for next quarter. Even though the bulls have tended to believe management, Texas Instruments has been an obvious accident waiting to happen for some time.

As if Texas Instruments wasn't bad enough, Vodafone (VOD) was bombed for 15% after the world's biggest provider of mobile-phone services pre-announced weaker results. (That pre-announcement aside, it's worth noting that many tech companies seem to be giving less advance warning. Now, they just augur in on their earnings releases.)

All in all, Monday night underscores the slowdown in wireless, demonstrates that even Apple, with all its new products, isn't immune (which should've surprised no one), and shreds the supposed safety of semiconductor capital equipment stocks.

After already having seen negative reports from Microsoft (MSFT), Google (GOOG), VMWare (VMW), Oracle (ORCL), and Cisco (CSCO), it's hard to imagine anyone with an IQ over room temperature still believing that tech would be a port (or profit center) in the storm -by now, even they should be fairly well disabused of it.

Goldilocks Loses Her Gold Card

Turning to the financial arena, Wachovia (WB) was a horror show. But the big news was that American Express (AXP) has now been impacted by the weak economy - which it specifically cited as a factor and said was much worse this quarter than it had been in January.

Amex also noted that it expects the economic weakness to intensify going forward, and that even "super prime card members" were being impacted. Of course, if Amex's customers are having problems, you can be sure that virtually every credit-card company is seeing its consumers struggling to pay their bills (despite help from government rebate checks).

Amidst the backdrop of those tech/financial earnings, only Caterpillar (CAT) and DuPont (DD) showed strength. Both are benefiting from higher commodity prices and generic inflation, at least in the short run.

But at the end of the day, no one wins in an inflationary environment.