Solid earnings from ORCL and ACN are the main drivers of the morning’s market strength. With about two weeks to go before Q1 earnings releases begin and notwithstanding these good reports, the market has to prepare for what I believe will be a more challenging quarter relative to expectations on the margin side. ORCL and ACN are comparatively immune to the rise in commodity prices because of their technology focus but many other industries are not and with corporate profit margins in the aggregate at near record highs, there is little room for error. We also have to watch for what disruption to business there will be from the Japanese disaster and while Q1 GDP forecasts have fallen to the 2% range from 3%+, I haven’t seen one equity strategist lower their ’11 earnings estimates. In Europe, soon after Fitch downgraded Portugal’s rating to A- to match S&P and Moody’s, S&P downgraded them to BBB and yields there are spiking again.
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