Wall St. has gone through the looking glass into Wonderland with Alice. The world is upside down now. Awful results at firms like E*Trade (ETFC) and Countrywide (CFC) can make shares rally. Outstanding results at a place like Amazon (AMZN) can cause a sell-off. It happened earlier in the month to Intel (INTC).
Amazon has to be the envy of the retail world, both online and brick-and-mortar. Fourth-quarter net income rose to $207 million, or 48 cents a share, from $98 million, or 23 cents a share, in the fourth quarter last year. Sales climbed to $5.67 billion, from $3.99 billion. That was all during a bad patch for holiday sales, one worse than any since 2001. Gross margins at Amazon dropped a touch, but just a touch.
Amazon also gave a robust outlook for 2008 and its shares dropped 11% to $65.
None of that makes any sense. The last time Amazon reported earnings, the stock reacted by moving above $100. The current earnings were better in almost every way, and the stock trades down by a third from where its was in late October.
A market is only as good as its reaction to the best earnings it sees. In a bull market, very good earnings get outstanding stock market results. Even mediocre earnings can be countenanced.
In a bear market, there is no such thing as good news.
Douglas A. McIntyre
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