Alcoa reported weak earnings last night. The aluminum market is being significantly affected by the weak global economy and is expected to be in the doldrums for a while. Alcoa's management is retrenching accordingly to adapt to the soft market and will do what is necessary to maintain its dividend which they have paid for 60 years. After listening to the earnings call last night, it is clear that when the economy starts to bottom out, this company will be well positioned to take advantage of the new opportunities. Stocks were weak again yesterday as they have been for a few days now.
We expect to see many earnings reports which will disappoint investors but the overall credit markets should continue to improve. The leveraged loan and high yield markets took a breather yesterday and traded off a little but they have been on a good run. We could see some more weakness but their march upward should continue.
2009 has started off with lower oil prices, weaker economic news, global tension, and stronger credit markets. Investors will continue to remain skeptical of when the economy will bottom but it will. Housing prices are still declining and the financial sector is still weak but a new stimulus plan and a focused President could help the bottoming process. A year from now stocks will be higher but volatility remains in the short-term.
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