U.S. futures are trading sideways after Monday's market plunge
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Good morning. Global stocks and U.S. futures have been sliding all morning as COVID concerns spook investors. Everything else seems to be secondary, including a batch of earnings beats that investors are largely ignoring, and, in some cases, are punishing.
Let’s see what’s moving the markets.
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As I noted in this space last week, the sacred “beat” is no longer moving investors.
There are exceptions, notably with BP and HSBC today. (The latter is helped by its dividend announcement, however.) But it’s no longer a given that shares will jump when companies outperform the consensus estimate on either the top- or bottom line.
As my colleague Anne Sraders reported yesterday, this trend has now gone to an extreme. She quotes BofA Securities who write in a Monday investor note, “So far this quarter, companies that beat on both top and bottom line have underperformed the S&P 500 by 5bps the day after (worst in history), and misses outperformed by 60bps, highest in history.”
There is some precedent for this bizzarro phenomenon—the tech bubble days of 2000, which was “the only earnings season in history when surprises saw perverse rather than intuitive reactions—beats were not rewarded and misses were not penalized.”
This up-is-down reaction comes as companies are having an impressive quarter, beats-wise. Sraders breaks down just how impressive.
Now, the real test for this trend comes this week as the companies reporting over these five days represent nearly 40% of the S&P 500’s combined earnings.
In other words, if the trend still holds true this time next week this will be something to watch over the coming quarters as well.
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Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
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