$DIA, $SPY, $QQQ, $RUTX, $VXX
Stocks paused to refresh Friday after being up 10.4% since Christmas Eve, earnings season begins in earnest next week,
Analysts have been very negative ahead of this coming reporting frame.
Earnings reports start next week with results from the big banks. And the warnings have been the most dire in 4 years.
Recent warnings for the Quarter from high-profile companies have had investors bracing for more bad news. Earlier this month, Apple’s (NASDAQ:AAPL) big cut in its revenue forecast added to fears among some market watchers that a possible Y 2019 earnings recession may be on the horizon.
Now with the bar low for companies to beat expectations, stocks could extend recent gains following the S&P 500’s worst December performance since the Great Depression.
“One of the Key things the December selloff did was it priced a materially reduced set of earnings expectations for 2019. As a result, investors are going to be somewhat forgiving of companies who either miss estimates or are somewhat tentative in their guidance because they are now expecting that,” said the head of investment and portfolio strategies at Morgan Stanley Wealth Management in New York.
With that in mind any companies that talk about Y 2019 being just as good as Y 2018 or even better are going to make for an Northside surprise.
While still relatively strong at 14.5%, analysts’ estimated profit growth for S&P 500 companies in Q-4 has fallen sharply since the start of October, when they forecast growth of 20.1%, according to IBES data from Refinitiv.
For Y 2019, analysts are expecting profit growth of just 6.4%, down from a 1 October 2018 estimate of 10.2% and a fall from 2018’s tax cut-fueled gainer of more than 20%
The bar for this earnings season is extremely low.
Heading into the Q-4 some analysts’ earnings revisions for S&P 1500 companies are skewing more negatively ahead of any reporting period since the Q-1 of Y 2015 according to the data.
Market valuations also have come down.
With the S&P 500 now trading near 14.9X expected earnings, according to Refinitiv data, compared with a multiple of 18 a year ago, market Bulls argue that stocks have become undervalued after the recent sharp declines.
Friday, the major US stock market indexes finished at: DJIA -5.97 at 23995.95, NAS Comp -14.59 at 6971.49, S&P 500 -0.38 at 2596.22
Volume: Trade on the NYSE came in at 803-M/shares exchanged .
- Russell 2000 +7.3% YTD
- NAS Comp +5.1% YTD
- S&P 500 +3.6% YTD
- DJIA +2.9% YTD
For the week ended 11 January 2019 HeffX-LTN’s overall technical analysis is Neutral to Bullish
Have a terrific weekend