Dozens of companies this past month posted blow-out earnings but instead of being thankful, investors stomped their feet and sold. The result: The Dow Jones industrial average fell 3.5 percent in January, the worst month for stocks since the depths of the bear market last year.
Investors want more, and they want it now.
One explanation for this surprising ingratitude is that they already had bid up stocks to a level that assumed very good profits. So when those expectations were met this past month, well, investors were less than impressed and decided to cash out.
Or maybe fear is driving the selling, too.
Dennis Delafield, co-manager of the $700 million Delafield Fund, says investors are finally realizing what everyone else has already figured out: The recovery won't be strong.
"Consumers are struggling, unemployment is high and people aren't able to use their homes to raise money," says Delafield, whose fund has returned an average 11.8 percent annually in 10 years. "Growth will be moderate and investors are worried."
One sign of that worry: The VIX, a gauge of expected volatility of Standard & Poor's 500 stocks, jumped 53 percent to 27.3 in the trading week ended Jan. 22. That's nowhere near the 89.5 it peaked at in October 2008 but was still above its historical average of 18-20.
In the past week, this so-called fear index fell to 24.6 but there still were signs all was not well.
On Thursday, Microsoft Corp. reported profits jumped 60 percent last quarter. Instead of cheers, it got boos. Investors wanted to see higher sales to business customers from the software giant, and so they dumped shares.
(Msnbc.com is a joint venture of Microsoft and NBC Universal.)
Overreaction? Let's hope so.
Investors consider Microsoft a sort of leading economic indicator, figuring that computer makers will only buy from the company if they're optimistic about sales themselves.
The actual numbers on the economy released last week only added to the confusion.
On Wednesday, the government reported new home sales plunged 7.6 percent in December. The next day it said durable goods orders for that month came in below expectations.
On Friday came a whopper: Gross domestic product rose a surprising 5.7 percent in the fourth quarter.
The market slipped anyway. Companies that were rebuilding their inventories during the final three months of the year contributed heavily to that blip up, and investors believe that the quarter's fast rate of growth cannot be sustained.
This week will bring a flurry of data to clear up the picture, or maybe cloud it further.
The Institute of Supply Management releases two reports — its purchasing manager surveys for manufacturers on Monday and for service companies on Wednesday. On Thursday, chain store sales for January are released.
On Friday comes the big one: employment figures for the same month.
Too many numbers? You can focus instead on one that really matters for equity returns: U.S. debt.
Debt levels are simply too high for strong economic growth and big stock returns, according to the latest investor letters from two respected moneymen — Bill Gross, managing director of bond giant Pimco, and Jeremy Grantham, founder of Boston asset manager GMO.
U.S. debt, both private and public, stood at $3.70 for every dollar of GDP at the end of September, up 50 percent in two decades and more than double from 1980.
Avi Tiomkin, chief investment officer of Tigris Financial Group, says that as businesses and families have struggled to pay off debt and cut spending, only the Federal Reserve and fiscal stimulus programs have kept the economy afloat.
And that means big trouble when those supports are withdrawn.
Tiomkin says a big rise in stocks such as we experienced in 2009 is not unusual after such a deep fall, and that those advances often lead to deep declines — and will again this time.
"We could see 8,000 on the Dow, easily," Tiomkin says.
Mutual fund manager Delafield is not nearly so pessimistic.
"I don't think we're falling off a cliff," he says. Still, he's not taking too many chances. He's holding a fifth of his clients' assets in cash, up from 7 percent three years ago.