Monday, April 21, 2014
Stocks made a strong comeback late last week on the back of
improving economic data, pushing the S&P 500 index back in
positive territory for the year. We don't have much on the
economic docket today or the rest of this week, but we have
entered the heart of the Q1 earnings season, with more than 150
S&P 500 members reporting results this week. Earnings will be
front and center this week and will determine whether stocks
sustain or lose last week's momentum.
Including this morning's reports from
), we now have Q1 results from 88 S&P 500 members that
combined account for account for 27.8% of the index's total
market capitalization .
) is the key report after close today, while
) will be reporting later this week.
Total earnings for these 88 companies are up +1.7%, with 63.6%
coming ahead of consensus earnings expectations. Total revenues
are up +4% and 42% are beating top-line expectations. The
composite growth rate for Q1, where we combine the results for
the 88 companies that have reported with the 412 still to come,
is for decline of -1.2% on +2.4% higher revenues.
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The results thus far are weaker than what we have been seeing in
recent quarters, but not by a lot. Earnings growth is weak and
fewer companies are coming out with positive revenue surprises
relative to other recent quarters. The Q1 weakness is likely no
surprise for the market, as expectations were quite low to begin.
But while investors may have 'written off' Q1 as the low point
for earnings this year, they are holding out for better times
ahead on the earnings front. The hope has been that the improving
domestic economic scene and stabilization in Europe will start
showing up in guidance from management teams as well. But we are
not seeing that, with managements continuing to provide sub-par
outlook for the coming quarter(s). In other words, management
teams are dishing out what they have been doing for more than a
What this means for the market is that we will continue to see
the same negative estimate revisions trend play out in the coming
weeks and months that we have been seeing for almost two years
now. The market wasn't overly concerned about that trend back
then, but seems to be a bit cautious this time around. With the
Fed expected to be less of a prop going forward, the market needs
a reassuring earnings backdrop to push stocks higher. But they
aren't getting that, at least not.
Director of Research