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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Clinched-Up Wall Street Awaits Second-Quarter Earnings

You know how you tense up when you think you're going to get punched? That's what Wall Street is doing today.

Aluminum giant Alcoa is expected to report its second-quarter earnings after market close on Wednesday, taking its usual position as the first of the major industrials to report quarterly earnings. Other companies will follow and we'll get a clearer picture of whether we're in an actual recovery or not.

So far, a tensed-up Wall Street thinks not, judging by today's big sell-off, which has erased yesterday's gains.

Shortly after the markets began moving sideways and then declining at the beginning of June -- the end of the big 35 percent rally that began in early March -- the whispers have been growing that this recovery is running out of steam, giving credence to the bears among us.

On Thursday, the markets were hit with a big sucker-punch: 467,000 jobs -- many more than had been forecast -- were shed in June, pushing the official unemployment rate to 9.5 percent and the Labor Department's unofficial number -- which we maintain is a truer one -- to 16.5 percent.

The markets were still digesting the bad jobs news on Monday, when the administration said it may have underestimated how bad the economy was doing (remember, the White House predicted unemployment peaking in the 8's and now it's closing in on 10 percent) and hinting broadly that a second stimulus plan may be needed, even as the first one is just starting to get paid out.

But government stimulus plans are part of the artificial economy and Wall Street knows it. Traders are waiting on the rubber-meets-the-road economic data included in corporate earnings.

When second-quarter earnings start flooding out tomorrow, we'll know more about the pickle we're in. Everyone wrote off the first quarter. But with the market rally beginning on March 6, companies should have reaped the benefit of any second-quarter recovery.

We'll see if they're right, starting tomorrow.

-- Frank Ahrens
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By Frank Ahrens  |  July 7, 2009; 3:22 PM ET
Categories:  The Ticker  | Tags: Alcoa, earnings  
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