Q3 earnings reactions have been extreme
Major U.S. indexes red; S&P 500 off ~1.4% Nasdaq down ~2.25%
Tech weakest S&P sector; Utilities lead gainers
Dollar ~flat; crude up 0.7%; gold off >1.5%; bitcoin down ~3%
U.S. 10-Year Treasury yield edges up to ~4.27%
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Q3 EARNINGS REACTIONS HAVE BEEN EXTREME
With earnings season in full swing, LSEG data shows that of the 324 S&P 500 .SPX components that have reported results through Thursday morning, 77.2% have topped EPS expectations, compared with a 67% beat rate since 1994 and 79% over the past four quarters.
On the revenue side, 58.3% have topped expectations versus the 62% beat rate since 2002 and also over the past four quarters.
Julian Emanuel, Evercore ISI's senior managing director for equity, derivatives and quantitative strategy in New York, notes that what stands out from this earnings season "is the severity of the price reactions."
In a note to clients, Emanuel said companies that beat on both the top and bottom line estimates are "trouncing" the 5-year average of their 1-day price move after reporting, "while any other reporting result is paying the price."
With the market at elevated valuations and historically uncorrelated, there is no margin for error, according to Emanuel.
Companies that have beaten on both EPS and revenue have seen an average gain of 2.6%, according to Emanuel, well above the 5-year average 1-day rise of 0.9%.
Companies that have missed earnings expectations but beat on the revenue side have seen an average 1-day drop of 4.6%, well above the five-year average 1-day decline of 1.8% decline.
A miss on both earnings and EPS has resulted in an average 1-day drop of 2.8%, roughly equivalent to the 3.1% 1-day fall average for the past five years.
Lastly, those companies that have topped earnings estimates but miss on revenue have lost 1.1% on average in the session following their reports, more than doubling the 0.5% average for the past five years.
(Chuck Mikolajczak)
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