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earnings season

Alcoa reported Tuesday that it made 6 cents (U.S.) a share from continuing operations in the fourth quarter of 2012, equalling analysts’ consensus estimates.Daniel R. Patmore/The Associated Press

Alcoa Inc. kicked off the U.S. earnings season with figures that matched profit forecasts but provided little encouragement for those hoping for market-moving gains.

The big aluminum producer reported Tuesday that it made 6 cents (U.S.) a share from continuing operations in the fourth quarter of 2012, equalling analysts' consensus estimates.

Revenue for the Pittsburgh-based company was $5.9-billion, up 1 per cent from the third quarter 2012, but down 2 per cent compared with the year-earlier fourth quarter. The shares gained about 1 per cent in after-hours trading.

As the first component of the Dow Jones industrial average to report numbers, Alcoa historically has been viewed as a market bellwether – hence the widespread interest in its results.

But some analysts are cautioning investors not to read too much into what Alcoa's announcement may portend for fourth-quarter profits across the entire U.S. economy. Alcoa is just one company, in a sector – materials – that doesn't have as much impact on the broader market as it once did.

"It's more psychological at this point," observes Howard Silverblatt, senior index analyst at Standard & Poor's in New York, of the impact of Alcoa's first reporting status.

The company's days of foretelling a general trend in the markets seem to be over, he said. Traders used to look at Alcoa's results and "then say: 'This is how the market's going to go,'" but that approach "is not working very well," in part because the economy's direction has become harder to read, according to Mr. Silverblatt.

He said Alcoa's results may have some implications for companies in the materials sector, but investors aren't going to look to them "for an idea of how did IBM do, how did tech do, or something."

A better picture of the underlying profitability of the U.S. corporate sector will emerge this week and next, as the trickle of corporate earnings announcements turns into a flood.

"There will undoubtedly be some hand-sitting from investors before a clearer company outlook emerges later in the week," remarked Alex Young, senior sales trader at CMC Markets UK, in a note to clients before the release of the Alcoa numbers.

Although Alcoa hogs the limelight among early earnings reports because of its membership in the Dow, a handful of U.S. companies have preceded it in releasing quarterly profit figures or unveiling new guidance.

To date, the picture has been mixed.

On Tuesday, agribusiness giant Monsanto Co. reported its quarterly profit nearly tripled in response to higher seed sales and increasing weedkiller prices. The shares advanced 2.6 per cent.

But several companies provided lowered outlooks, including fast-food restaurant operator Yum Brands Inc., which reported disappointing same-store sales in China, and video game marketer GameStop Corp., which said its sales over the important holiday period declined. Shares in both companies sold off sharply Tuesday, with each falling more than 4 per cent.

Mr. Silverblatt said analysts are looking for near-record earnings among the S&P 500 companies this quarter, which should hearten investors going forward, barring a serious deterioration in the outlooks the companies provide for 2013.

Forecasters expect earnings of $25.29 for this year's fourth quarter, just below the record high of $25.43 posted in the second quarter and well above the figure of $23.73 reported for the final three months of 2011.

Mr. Silverblatt said a few big earnings announcements by major companies such as Apple Inc. "could easily put you into a record" high profit figure for the S&P.