U.S. companies are putting up one of their best earnings seasons in three years on the back of robust economic growth. It’s just not enough to offset worries about tariffs and high interest rates.
Baird investment strategy analyst Ross Mayfield explains where investors can keep an eye out for investible sectors in a bullish market.
But that doesn’t mean investors are rewarding the performance. Stocks beating estimates have still underperformed the S&P 500 by an average of 0.1% on the day of reporting results — one of the worst reactions in four years, BI figures show. And companies falling short of expectations are being punished, with their shares trailing the benchmark by an average 3.2%.
“The S&P 500 is easily on track to double its earnings hurdles, but a lower beat rate and sky-high investor expectations for the dominant Magnificent Seven has tripped up stocks as they hesitate around all-time highs,” said Gina Martin Adams, chief equity strategist at BI.Indeed, some of the so-called Magnificent Seven group of tech firms, including Alphabet Inc., Microsoft Corp. and Amazon.com Inc., have underwhelmed with their results.
“We have seen defensive sectors beating sales estimates more than cyclical sectors, with the price reaction to earnings-per-share misses being quite sharp,” she said. “On top of it, guidance is coming in a bit weak.”
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