Earnings were above average, as uncertainty about the timing of the Fed's rate cuts and concerns about the impact of the Fed keeping interest rates at a 23-year high weighed on stock prices at the start of the year. It has continued to support the recent trends. rise in the stock market.
Across about two-thirds of the S&P 500's quarterly reports, companies have on average 6 percentage points higher in earnings per share than the current quarter, according to Bank of America. This is about double the average of 3% that S&P 500 companies typically see.
Overall, 70% of companies are reporting beats, which is higher than the historical average of 63%. According to FactSet, the S&P 500 (^GSPC) is on pace for his earnings per share to increase 1.9% year-over-year. S&P 500 returns turn positive, but there are signs of weakness
Oson Kwon, U.S. and Canadian equity strategist at Bank of America, told Yahoo Finance that returns to date have been “good” based on expectations.
“Beat is driven by profit, not necessarily sales,” Kwon said. “I don't think anyone really expected sales to improve this much in the fourth quarter…Companies are cutting costs, margins are improving, and companies are delivering.”
However, earnings are not without problems. Boffa said references to weak demand remained “high”, but revenue was barely above expectations. And companies that fail will experience worse-than-normal stock prices during subsequent business days.
According to BofA, companies that miss Wall Street's earnings and revenue expectations see their stock prices decline by an average of 4.3% the next day. This is significantly higher than the typical average decline of 2.4%.
“Overall market sentiment has improved significantly over the past two months,” Kwon said. “Valuations aren’t cheap, so if you’re lacking; [earnings estimates]If you do so, you will be subject to more penalties than before, so the bar will be much higher. ”
