Wednesday, January 29, 2014
Pre-open sentiment is on the weak side as the emerging market scare
is back and the U.S. Fed is expected stick with its Taper plan in
Bernanke's last FOMC meeting as Chairman. Adding to the uncertain
backdrop is a slew of mixed Q4 earnings reports this morning, with
companies beating estimates but guiding lower.
The Fed isn't expected to produce any surprises in its statement
this afternoon. Bernanke had effectively outlined a $10 billion
Taper pace at each meeting in his December press conference (there
is no press conference or forecasts after today's meeting).
They will evaluate the economic landscape at each meeting, but
public comments from the FOMC members following the December
meeting point towards a high threshold level for them to deviate
from the announced Taper plan. The weak December jobs reading and
the recent soft Durable Goods report certainly wouldn't cut it for
They are unlikely acknowledge the emerging market turmoil either;
they didn't do it last summer either when the emerging market
currency and bond markets reacted sharply to the first Taper
indication. Not that they will ever publicly concede it, but I
don't think they mind the recent pullback in Treasury yields as a
result of the emerging market noise. While the possibility of some
subtle changes to the post-meeting statement can't be ruled out,
the market will be perfectly fine with the Fed sticking with the
announced Taper plan.
If there is any question or doubt in the market's collective mind
over Fed policy, it is about the prospect of an accelerated Taper
in the event of an above-trend economic turnaround. But as some of
the more recent economic reports have showed, we are not there yet.
On the earnings front, we got better-than-expected results from
) beat estimates but came up a bit short on guidance. The guidance
shortfall is also present in the
) reports this morning and last evening's
Including these reports, we now have 2013 Q4 results from 164
S&P 500 members, accounting for 45.3% of the index's total
market capitalization. Total earnings for these companies are up
+16.6% from the same period last year, with 70.7% beating earnings
expectations. Total revenues are up +4%, with 57.9% beating revenue
expectations.?????? These are better results than we have seen from
this same group of companies in recent quarters, even through the
strong 'headline' earnings growth rate is mostly due to easy
comparisons for a few big companies.
The ratio of companies beating top- and bottom-line expectations is
better than what we saw from this same group of 164 S&P 500
members. Even the blended beat ratio -- the ratio of companies
coming ahead of consensus EPS and revenue estimates -- thus far in
Q4 is higher than recent quarter quarters.
While the growth rates and beat ratios in Q4 are better relative to
recent quarters, we haven't seen much difference on the guidance
front, with companies still providing an underwhelming outlook for
the current and coming quarters. As a result, estimates for the
current quarter have been steadily coming down as the Q4 reporting
season has unfolded.
Total earnings for the S&P 500 are now expected to be down -1%
in 2014 Q1 compared to expectations of +2% growth at the start of
the month. Nothing new there as we have been seeing this negative
estimate revisions trend play out quarter after quarter. The market
didn't pay much attention to this revisions trend the last couple
of years, but they will need to be a bit more discerning and
discriminating in the coming days.
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EMC CORP -MASS (EMC): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
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YAHOO! INC (YHOO): Free Stock Analysis Report
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???Director of Research