A Gravity-Defying Market - Ahead of Wall Street
May 09 2013 - 5:52AM
Zacks
Thursday, May 9,
2013
Stocks continue to defy gravity and today’s market action will
likely be no different despite the frothy-looking inflation data
out of China and the soft tone of pre-open sentiment. Offsetting
the Chinese inflation numbers are the better than expected weekly
Jobless Claims data on the home front, which should help sustain
the positive sentiment created by last week’s better than expected
April jobs report.
Irrespective of the tone of today’s jobs data from the home front
or Chinese inflation news, the stock market seems to know only to
move in one direction. That’s not what history tells us, but that’s
what we have been seeing lately. The jobs data last week was
undoubtedly positive, as are this morning’s initial claims numbers.
But stocks had been moving higher even before the jobs numbers in
the face of all around underwhelming economic and earnings data.
The takeaway from this market behavior is that as long as the Fed
remains on its current course, the market will be more than willing
to overlook fundamentals.
The Q1 earnings season, now in its final stretch, has mostly been
'average' or 'below average', but you wouldn't see that in the
market's response. Including this morning’s reports from
Dean Foods (DF), Apache
(APA), and Dish
Network (DISH), we
now have Q1 results from 445 S&P 500 companies. Total earnings
for the 445 companies are up +3.6% from the same period last year,
with 65.6% beating earnings expectations. Revenues are down -0.9%,
with only 41.8% of the companies coming ahead of top-line
expectations. The composite growth rate for Q1, where we combine
the results of the 445 companies that have reported results with
the 55 still to come, is for +2.4% growth in earnings on -0.8%
lower revenues.
The Q1 earnings growth rate has turned to be better relative to
pre-season expectations, but top-line performance has undoubtedly
been on the weak side. Estimates for the coming quarters,
particularly Q2, have started coming down giving the overwhelmingly
soft tone of company guidance. However, expectations for the back
half of the year and next year still reflect a level of growth
rebound that is inconsistent with what we have seeen in the last
few quarters, including the Q1 earnings season.
Sheraz Mian
Director of Research
APACHE CORP (APA): Free Stock Analysis Report
DEAN FOODS CO (DF): Free Stock Analysis Report
DISH NETWORK CP (DISH): Free Stock Analysis Report
SPDR-SP 500 TR (SPY): ETF Research Reports
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