Stock pickers sidelined with world events overshadowing earnings
Earnings season typically is the time when investors can look past macroeconomic forces and focus on company-specific news moving stocks. This quarter, however, is turning out to be anything but typical.
Individual shares have, of course, reacted to earnings announcements in the week or so since Corporate America started reporting results. But conflict in the Middle East and surging Treasury yields are taking precedence, causing S&P 500 Index constituents to increasingly move in unison as global events sway markets broadly.
In four of the six trading sessions since the reporting cycle kicked off on Oct. 13, at least 400 members in the S&P 500 have moved in the same direction. It’s a frequency that didn’t appear once in comparable weeks the past three earnings periods.
Such concerted moves — up and down — are further complicating the lives of stock pickers in a year when they’ve had little luck, with only 37% of large-cap active managers outperforming their benchmarks as of the end of September, data compiled by Bank of America Corp. show.
“Macro is dominating the narrative again,” Quincy Krosby, chief global strategist at LPL Financial, said by phone. “The situation in the Middle East obviously weighs on sentiment.”
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Combined with 10-year yields near the highest since 2007 and the threat of a US government shutdown next month, “together, that’s making the lives of active stock pickers harder.”
Third-quarter earnings season is off to a mixed start. Most banks are doing fine, but Tesla Inc., one of the biggest gainers in the S&P 500 this year, disappointed.
Discerning winners from losers, at least in the immediate aftermath of corporate results,
