The Lead Lag Report: Navigating Murky Waters: How Mega-Cap Tech Earnings Mask Underlying Market Uncertainties
Four times each year, corporate America reports earnings. An entire cottage industry has been built up on Wall Street of analysts who parse the data and speak to company executives. They then try and predict earnings in advance. These predictions become earnings expectations.
Typically, the bar is set a bit low. That makes it easy for a company to beat expectations. Usually, when that happens, a stock’s price tends to move higher.
Last week saw some solid, but not exceptional, earnings out of most of the big tech companies. In pure dollars, they represent a big chunk of total earnings overall.
However, small-cap stocks have shown more signs of a struggle. However, these companies don’t make the headlines like the big-cap names that are familiar to investors… and a major part of any market index.
Looking at corporate America as a whole, the picture is more muted. Lower volatility stocks have generally performed better than higher volatility stocks. That suggests that investors are staying a bit more cautious than they have earlier in the year.
And with banking failures in the spotlight once again, long-term Treasuries have been holding strong as well.
While all this data may not point to a market crash anytime soon, it does indicate a slowdown is underway. And that the recent rally may stall out for a few weeks.