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Pre-Market Primer: A Doozy of an Earnings Season Ahead


Alcoa is the first Dow component to report today, and an 81% plunge in earnings might presage a terrible quarter for corporate America.

MINYANVILLE ORIGINAL Investors looking for a bright spot amidst the European debt crisis and past few months of disappointing jobs data will probably not find it in the corporate earnings statements for the second quarter.

Alcoa (AA) kicks off earnings season today, and the company's results are not expected to be very heartening. The aluminum company is expected to report an 81% yearly drop in profits, driven down by the global surplus and low price of the light metal.

Pessimistic profit outlooks outweigh positive ones by over 4 to 1 for S&P 500 (SPY) companies. 42 companies, including Ford (F), Texas Instruments (TXN), Procter & Gamble (PG), and United Technologies (UTX), have cut earnings estimates.

Later this week, JPMorgan Chase (JPM) will release its first quarterly financial statement since disclosing its multi-billion-dollar trading loss in May. The company insists that it was "solidly profitable" as a whole last quarter, but estimates as to the size of the trading loss vary between $2 billion and $9 billion dollars.

With Alcoa earnings, the first Dow (^DJI) component to report, on tap, US stock futures are pointing towards a lower opening. Dow futures are down 0.37% at 12,680.00. S&P 500 futures fell 0.40% to 1,346.40 and Nasdaq (^IXIC) futures slid 0.19% to 2,604.00 ahead of the opening bell.

In Europe, stocks dropped for the fourth straight day ahead of a meeting of eurozone finance ministers. At this meeting, the June summit's much touted plans to inject liquidity into Spain's troubled banks is expected to be fleshed out today. Creditor countries such as the Netherlands and Finland will probably oppose plans to allow the currency union's rescue funds to buy the risky Spanish and Italian debt.

The borrowing costs of Spain and Italy both rose ahead of the meeting. Spain's 10-year bond yields spiked above 7% again, to 7.04%, while Italy's rose to 6.07%. Germany short-term bonds were in such high demand today that investors paid the country for the pleasure of lending it money. Germany sold 3.29 billion euros of six-month debt for a record low yield of -0.034%.

Greece's new Prime Minister Antonis Samaras won a confidence vote, securing his government's control of the parliament. His government is confident that it can convince creditors to cut it some slack and let it put off some fiscal austerity. Alexis Tsipras, the leader of the largest opposition party, isn't quite satisfied with that. Tsipras told the Samaras government that the bailout that led to fiscal austerity was a "fiscal and economic crime."

"You are not pro-Europeans, you are Merkelists. Berlin will lead Europe to dissolution," Tsipras said.

In US economic news, a report on consumer credit is due out at 3 p.m. Economists expect the report to show that credit outstanding grew by $8.5 billion in May.

After the rate-fixing scandal, Britain-based Barclays (BCS) is considering splitting the company in two and possibly floating its investment banking arm on a New York exchange, according to the Sunday Times. Barclays recently settled for $453 million with regulators after it was found that the bank was among several that were responsible for illegitimately fixing the London Interbank Offered Rate, or LIBOR, which affects the rates on loans all over the world.
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