Credit: Shutterstock photoThursday, February 11, 2016
Stocks are on track for an all-around sell-off at the open in today's session, which would follow overnight turmoil in Asian and European markets. The immediate cause for all of this is Janet Yellen's first day of Congressional testimony on Wednesday; she is due for another day of testimony today.
We will see if the Fed Chairwoman can come up with something reassuring for this market, but the odds don't look good. The fact is that the central bank is in an unenviable situation; markets simply aren't willing to let them stay the course that they announced in December and they stand to lose face if they shift course and turn too dovish.
Yellen tried to strike a balance in her Wednesday testimony in front of the House committee by acknowledging fresh concerns about the international backdrop while continuing to stay optimistic about the domestic outlook. The market's reaction Wednesday afternoon and this morning shows that her effort didn't work.
The issue is likely more than what Yellen can say or do today - the Fed is simply out of simple and straightforward solutions. A complete reversal of the December course will mean more than just a loss of face; it would significantly erode the central bank's credibility, which is so key to stability in the markets.
Stocks aren't the only asset class in turmoil today - the dollar has gained ground, gold is up and treasury yields are down. All of this mayhem would point in the Fed's direction, but we shouldn't lose sight of today's fresh downturn in oil prices , with U.S. benchmark prices now below $27 a barrel. Stocks and oil have maintained a tight relationship lately, with markets seeing oil effectively as a proxy for the health of the global economy. As such, today's oil decline is likely driving and not following stock market movements.
On the earnings front, we had a big batch of top-tier results after the close on Wednesday, with results from Cisco ( CSCO ), Whole Foods ( WFM ), Tesla ( TSLA ) and Twitter ( TWTR ). Cisco stood out in its report - not only did beat estimates and raise guidance, but it also announced a dividend hike and a bigger buyback program.
Cisco shares are on track to be among the few in today's downbeat session to be in the green. That's not the case with Whole Foods and Twitter, with market participants not happy with both of those operators. With respect to Tesla, the key part of the report was the raised guidance for full-year production.
Including all of these reports from yesterday afternoon and this morning, we now have Q4 results from 371 S&P 500 members that combined account for 83.7% of the index's total market capitalization. Total earnings for these companies are down -5.4% from the same period last year on -4.6% lower revenues, with 67.5% beating EPS estimates and 47.8% coming ahead of revenue estimates.
The blended (or composite) picture for the quarter, combining the actual results from the 371 index members with estimates from the still-to-come 129 companies, is for earnings to be down -6.6% on -4.3% lower revenues, the third quarter in a row of negative earnings growth for the index.
Sheraz Mian
Director of Research
Note: In addition to this daily pre-open article about the market, economy, and the corporate earnings picture, Sheraz Mian also provides detailed earnings analysis in his weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz Mian publishes a new article, please click here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
