{"id":9439,"date":"2023-11-04T04:23:07","date_gmt":"2023-11-04T04:23:07","guid":{"rendered":"https:\/\/infundpros.com\/markets\/the-stock-market-had-its-best-week-in-nearly-a-year-earnings-say-watch-out\/"},"modified":"2023-11-04T04:23:08","modified_gmt":"2023-11-04T04:23:08","slug":"the-stock-market-had-its-best-week-in-nearly-a-year-earnings-say-watch-out","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=9439","title":{"rendered":"The Stock Market Had Its Best Week in Nearly a Year. Earnings Say Watch Out."},"content":{"rendered":"
\n
<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

The market\u2019s fear gauge says to expect calm. The response of individual stocks to earnings has been anything but. Don\u2019t be surprised if turbulence returns sooner rather than later. <\/p>\n

The
\n S&P 500 index
\n rose 5.9% this past week, its best week since November 2022, while the
\n Dow Jones Industrial Average
\n advanced 5.1% and the
\n Nasdaq Composite
\n gained 6.6% after the Federal Reserve refrained from raising interest rates and a payrolls report showed the labor market cooling.<\/p>\n

\n

No wonder the
\n Cboe Volatility Index,<\/span>
\n or VIX, which measures expected S&P 500 volatility and signals the degree of uncertainty, fell to 14.9, down from an October peak of almost 22. That\u2019s a sign that investors, after a brief panic, have stopped worrying and learned to love the market again.<\/p>\n

The contrast with individual stocks could hardly be greater. While market volatility has slipped, shares of companies reporting earnings have been flying all over the place.
\n Roku
\n (ticker: ROKU),
\n Shopify
\n (SHOP), and
\n Palantir Technologies
\n (PLTR) gained more than 20% after their reports, while
\n Paycom Software
\n (PAYC),
\n ON Semiconductor
\n (ON), and
\n Est\u00e9e Lauder
\n (EL) dropped 19% or more. <\/p>\n

On average, though, the market has done more punishing than rewarding. Shares of companies that beat earnings and sales estimates have advanced just 0.3% on average, according to Evercore ISI data, while companies missing forecasts on both have dropped 4.8%. That 5.1-percentage-point gap is wider than the historical average of 4.1 points, while the gain is smaller and the loss is bigger than they typically have been. <\/p>\n

The numbers haven\u2019t been bad. Earnings per share for S&P 500 companies have beaten estimates by 6.9% so far this reporting season, per Evercore, as sales have come in slightly ahead of forecasts and profit margins have been higher than expected. The problem for stocks is that the S&P 500 is already up double digits for the year, reflecting these profits, and investors are always looking to the future. <\/p>\n

\u201cWhat I believe is driving the volatility is that [earnings] growth is priced in for 2024 and 2025, and if growth does not materialize, equities have to price down,\u201d says Spencer Hakimian, founder of Tolou Capital Management.<\/p>\n

And price down they have. ON Semi, for example, cited weakening automotive chip demand for its disappointing fourth-quarter profit guidance. Its stock dropped 22%. It wasn\u2019t alone in its pessimistic outlook. From Oct. 3 through Nov. 2, no company raised fourth-quarter earnings-per-share guidance when reporting earnings.<\/p>\n

\u201cIf the forward guidance is weak, really watch out,\u201d Hakimian says. <\/p>\n

For now, the stock market is taking its cues from the bond market, where the 10-year Treasury yield, whose spike had caused investors to panic, fell 0.289 percentage point to 4.557%, its largest one-week decline since March. The issue is that still-high interest rates could slow the economy and put 2024 and 2025 earnings at risk. And that alone should mean a more volatile market.<\/p>\n

\u201cGiven that we\u2019re past the phase where governments are trying to keep rates really low, a high-teens VIX would be fairly normal,\u201d says David Miller, co-founder of Catalyst Capital Advisors. \u201cYou can expect an 18 to 19 VIX level.\u201d <\/p>\n

Fasten your seat belts. It\u2019s going to be a bumpy ride. <\/p>\n

Write to <\/strong>Jacob Sonenshine at jacob.sonenshine@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The market\u2019s fear gauge says to expect calm. The response of individual stocks to earnings has been anything but. Don\u2019t be surprised…<\/p>\n","protected":false},"author":1,"featured_media":9440,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":{"0":"post-9439","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets"},"yoast_head":"\nThe Stock Market Had Its Best Week in Nearly a Year. Earnings Say Watch Out. | inFundPros<\/title>\n<meta name=\"description\" content=\"The market\u2019s fear gauge says to expect calm. The response of individual stocks to earnings has been anything but. 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