At the start of earnings season, companies are pulsing, but stocks are lacking, says JPMorgan
It’s early in the second-quarter earnings reporting season, but so far most US and European companies are beating analyst estimates, but their stock performance is lagging, according to JPMorgan.
“From early reports, with 70 S&P 500 results and 90 in Europe, most are beating consensus projections,” Mislav Matejka, JP Morgan’s head of global and European equity strategy, said in a note to clients early Monday. “The sample set is relatively small, but the stock price reaction to pacing is worse than normal.”
In addition, JPMorgan analyzed companies that issued profit warnings ahead of second-quarter earnings, and stocks within that group fell 10% or more, with the exception of some energy and chemical stocks, likely due to poor performance in the first half of July.
In a nutshell, JPMorgan doesn’t expect second-quarter earnings to give the market much of a lift compared to the first quarter, for a couple of reasons. “Broad stock price reactions could be more subdued this time around, or at least any positive momentum might be legless,” Matejka wrote. “Before Q1, sentiment and positioning were cautious, but the stock market was strong entering Q2 reporting season, suggesting buying expectations are higher, even as analyst projections are dovish. Also, the question is whether forecasts will rise due to quarterly data, as there was some loss of momentum as we moved into the quarter and China data flow continues to disappoint.”
—Scott Schnipper Michael Bloom
Stock futures open flat on Monday
US stock futures opened little changed on Monday.
Futures linked to the Dow Jones Industrial Average returned just 5 points, or 0.01%. Meanwhile, futures for the S&P 500 and Nasdaq 100 were up 0.02% and 0.03%, respectively.