US markets look set to open mixed today following yesterday’s drubbing that saw the Dow Jones down over 160 points as the switch out of high-valuation momentum stocks accelerated. Upcoming today we have the beginning of earnings season with Alcoa results out before the bell. Futures suggest the S&P500 will open 1 point lower at 1,844 with the Dow expected to open 5 points higher 16,250. The Dow had a large reversal of fortunes late last week as all-time highs were short-lived and the index eventually closed at the bottom of end of the weekly trading range. The sell-off accelerated Monday as the wider market became aware of the switch out of ‘momo’ stocks that had been quietly been taking place throughout the month. The Nasdaq recorded its worst three day stint in two years. Earnings season begins today and with economic data from the first quarter hardly inspiring, the assumption is that earnings are likely to follow suit. It remains to be seen whether this drop in earnings if it happens, is temporary and due to poor weather or symptomatic of wider problems with the US recovery. For the time being though, many of the names currently being dumped are trading way above typical valuations and if earnings dip those valuations would have been even more extended. Prices are essentially adjusting ahead of lowered expected earnings; it’s just that multiples were particularly high, so the correction has proved particularly strong. In traditional fashion, Alcoa kicks off with results today. Consensus expectations are for Alcoa to report 5c earnings per share and $5.57bn in revenue. The company missed EPS estimates last quarter but has generally traded higher with the wider stock market. While the current broad sell-off is not the best time to buy stocks, on a relative basis, the switch from growth to value stocks benefits Alcoa which trades at only 1.06 times tangible book. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.