Stocks were broadly down in January, with a combination of
emerging market scare and a lackluster earnings season giving
investors a reality check that markets don't always go up as had
been the case last year.
This week's top-tier economic data - the ISM survey later
today and Friday's January jobs report - will likely do little to
change the mood in any sustained fashion as long as the emerging
market question remains unanswered. For stock market investors,
the issue is mostly psychological at this stage.
But if the problem persists longer than a few more weeks, then
it has the potential to become a direct headwind for stocks
through damage to the growth outlook for these countries. It's a
bit quiet today on the emerging market front, but the issue is
We don't have much on the earnings front this morning, with
) as the notable report after the close today. But the rest of
this week will bring in results from a host of bellwethers like
) and new high-flyers like
We are past the half-way mark in the Q4 reporting cycle
already, with results from 251 S&P 500 members out as of
Friday. Total earnings for these companies are up +11.4% from the
same period last year, with 70.1% coming ahead of consensus EPS
estimates. Total revenues are up +1.6% and 59.4% have beat
The market hasn't shown much enthusiasm for the Q4 earnings
reports, through overall results have been no worse than what we
have been seeing over the last few quarters. In fact, this
earnings season has been better than recent quarters in terms of
earnings growth and positive earnings surprises.
The disappointing part has been on the guidance front. But
even there, the issue is more lack of any improvement than any
new evidence of weakness. ??????It appears that investors were
looking for something better, particularly on the guidance front.
The hope was that given the improving domestic economic scene and
signs of stabilization in Europe, we will get relatively
reassuring guidance from management teams.
But we are not seeing that, with managements continuing to
provide sub-par outlooks for the coming quarters, causing
estimates to keep coming down. The ongoing emerging market
turmoil, if it persists long enough, has the potential to further
accelerate this negative trend.
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