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Squawk Morning Briefing: DJIA’s AA Loses

The DJIA’s AA isn’t a rating, it’s component stock Alcoa which kicked off earnings season Tuesday with bottom line results which fell short of expectations.  Just as Alcoa seems unable to lift its earnings, it is equally impotent in its impact on the DJIA.   AA traded for $10.30 at Tuesday’s cash close.  Only Bank of America has a lower price among DJIA components.   Both seem paltry when compared to IBM’s hefty $185 price tag.   As we go to press, AA is down about 4%;  IBM can counteract that all by itself with a mere 0.2% gain.

While reporting a bottom line loss, Alcoa also told us that they took in more on the top line than analyst’s were expecting.   One one hand this might be interpreted as a good thing, especially for the DJIA.   Think about it this way, if AA is selling more stuff then that’s a good economic sign.  So if AA is selling more and not making a profit then that’s merely a problem with the company, not the economy.  If so, it might only hurt AA’s price and we have already established that AA is pretty much powerless to move the needle on the DJIA.

So in one sense the AA report might help the DJIA.   However, after the earnings release the company’s chairman was out giving interviews which were quite negative on the overall world economy.   If anyone pays attention, these comments may weigh heavily on markets — much more than the stock could through its participation in averages.

As of this morning, markets seem to be shrugging off the news.  This isn’t inconsistent, as we’re allowing for a continued grind higher before a correction downward.

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