Have Expectations Caught Up to Prices? It Depends
Companies have been beating Wall Street’s earnings estimates, and this season has been no exception. Unfortunately, the magnitude of that outperformance has been lackluster, which is, in turn, putting downward pressure on stocks.
More than 60% of the companies in the S&P 500 Index have now reported their third-quarter earnings, including most of the biggest names by market capitalization (such as Microsoft, Meta, Amazon and Alphabet). Those companies’ aggregate earnings results have been just 3.3% above estimates (see the chart). That’s the lowest level in two years.
See more: Can Q3 Earnings Get Back on Track After Being Rattled by Big Tech’s AI Prints?
So while businesses are still doing better than expected, the additional upside they’re delivering isn’t as strong as it has been. That’s an unwelcome surprise to investors, who often expect companies that have beaten estimates by large margins to keep improving that outperformance and post increasingly larger earnings beats. The current reversal is keeping stock prices in check.
Source: https://etfdb.com/etf-strategist-channel/expectations-caught-up-prices-depends/
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