Earnings Season Is Shaping Up Nicely. Investors Don’t Seem to Care.
The corporate earnings downturn is poised to end, but you wouldn’t know it looking at the stock market carnage. With the third-quarter earnings season nearly halfway over, companies in the S&P 500 are on track to post a 2.7% year-over-year increase in profits, according to a FactSet blend of reported results and consensus analyst estimates. That would mark the first earnings growth in four quarters.
Yet few companies are reaping rewards for stronger-than-expected results. S&P 500 companies reporting positive earnings surprises have seen their shares fall an average of 1% in the period from two days before their report through two days after, compared with the five-year average of a 0.9% advance, FactSet data show. The pain in the highflying technology sector has been particularly acute.
Google parent Alphabet, for example, lost nearly $168 billion in market value this week, despite posting its strongest business growth in more than a year. Meta Platforms, the owner of Facebook and Instagram, saw its market value drop more than $30 billion even after reporting its highest quarterly revenue since going public in 2012. “The earnings recession is generally over, but when you look at the Magnificent Seven, they were just priced-to-perfection, so I’m not surprised," said Gina Bolvin, president of Bolvin Wealth Management Group, of the group of tech stocks that led the market’s first-half advance.
The stress in the tech sector spilled over into the broader stock market. The Nasdaq Composite dropped 2.6% for the week, while the broader S&P 500 fell 2.5%. Both indexes suffered corrections, falling more than 10% from their highs in July.
Read more on livemint.com
