Corporate News Is Good, But It’s Still a Bear Market

Bear Stock MarketOne of the best companies to follow is E.I. du Pont de Nemours and Company (NYSE/DD), more commonly known as DuPont. This 208-year-old company is perhaps the greatest economic barometer due to its diversified global operations. If you want to know what’s happening in the industry, then all you have to do is follow DuPont.

The company just reported great second-quarter earnings and the numbers handily beat consensus estimates. This is a real accomplishment in this economy.

DuPont reported outstanding sales growth of some 26% to $8.6 billion in the second quarter. At a time when most large companies are struggling to generate any sales growth at all, this is a tremendous performance. Not only did the company experience higher selling prices in most of its markets, total volume of products sold grew a solid 21%. And the good news is that the company’s domestic U.S. operations experienced solid growth. Total U.S. sales grew 18% to $3.6 billion. Asia Pacific operations grew 47% to $1.8 billion.

Naturally, this strong performance translated right to the bottom line. Net income tripled to $1.2 billion, compared to 400 million dollars in the same quarter last year. And, to top it all off, DuPont increased its earnings guidance for all of 2010 to between $2.90 and $3.05 per share, up from the previous estimate of $2.50 to $2.70 per share.

I always make a point of following DuPont and its financial results. I don’t own the stock, but what the company says about its operations is telling because of all the businesses it operates: chemicals; agriculture; electronics; and automotive.

But, for all the good news at this particular company, the equity market isn’t much enthused. Investors are caught in a funk, just like consumers. We’re in a bear market and sentiment just isn’t strong enough to carry good news. That’s why some downside protection in this market is a must.

I’m worried about after earnings season, when equity investors will have to rely solely on economic data. Sentiment is already fragile and the stock market seems only willing to act mostly on bad news while ignoring any good news. We’re getting technical bounces in stock prices, but I think we’re still in for this large trading range around Dow 10,000. If corporate earnings aren’t good in the third quarter, then we could be talking about a new consolidation around Dow 8,000. It’s a bear market, so anything could happen.