Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Weak Q1 Corporate Earnings to Finally Trip Up Illogical Stock Market

Stock-Markets / Corporate Earnings Jan 23, 2014 - 12:16 PM GMT

By: DailyGainsLetter

Stock-Markets

John Paul Whitefoot writes: Stock markets are only as healthy as their stocks—well, at least they technically should be. But despite its stellar year in 2013, the S&P 500’s component stocks weren’t supporting the growth with strong revenue and earnings growth.

I might sound like a broken record, but the fact of the matter is that the S&P 500 was fuelled by the Federal Reserve and its $85.0-billion-a-month quantitative easing efforts and artificially low interest rates, and the fact that businesses were streamlining operations and implementing aggressive share repurchase programs.


When it comes to financially engineering quarterly results, companies on the key stock indices logged a record-high for share buyback activity. In fact, in 2013, share buybacks amounted to $460 billion—the highest amount since 2007.

Companies on the S&P 500 embraced cutbacks and share repurchase programs because their earnings were nothing to talk about. Despite a year full of all-time-highs, each quarter, a larger percentage of companies on the S&P 500 revised their earnings guidance lower—a seemingly obvious disconnect.

During the first quarter, 78% of S&P 500 companies revised their earnings lower; 81% did so in the second quarter; and a record 83% of firms offered lower earnings guidance in the third quarter. Not to be outdone, the fourth quarter saw 94% revise their guidance lower. (Source: “Record high number and percentage of S&P 500 companies issuing negative EPS guidance for Q4,” FactSet, January 2, 2014.)

In spite of the earnings disappointment, the S&P 500 continues to march illogically higher. The index might have gained 30% in 2013—but did it come at a cost? To keep growing, stocks actually have to start posting legitimate earnings.

Investors will (finally) not be content with the slight-of-hand cost-cutting measures companies have been using to boost earnings. And investors don’t look like they’ll take just solid returns in stride either. They’ll be looking for strong gains to justify the high valuations stocks have been enjoying over the last couple of years.

Case in point: shares in General Electric Company (NYSE/GE) sold off last Friday despite the company posting higher-than-expected revenue and strong earnings growth. This means that investors felt the results weren’t amazing enough to justify the company’s current levels.

Where will the markets go this week? It’s time for companies on the S&P 500 to wow investors. More than 60 S&P 500 companies are scheduled to release their results during this holiday-shortened trading week. As the week closes out, we’ll have a better feel as to whether or not the index can justify hovering near its record high.

And that might be a tough task. Not only is the U.S. economy perched precariously but so, too, are the major global economies. China and India have both seen their manufacturing bases weaken. Production in Britain is at the same level as it was in July 2013 and Canada’s December purchasing managers index (PMI) declined to its lowest level in 23 months. These are important indicators to take into consideration—especially when you consider that almost half of the firms that make up the S&P 500 generate revenues from outside the U.S.

Investors who think the S&P 500 is fairly valued might want to add an exchange-traded fund (ETF), such as Vanguard S&P 500 ETF (PSX/VOO) or SPDR S&P 500 (NYSE/SPY), to their portfolio. Those who are bearish on the index may want to consider shorting those same ETFs.

This article Weak Q1 Earnings to Finally Trip Up the Illogical S&P 500 was originally published at Daily Gains Letter

© 2014 Copyright Daily Gains Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in