Earnings Season

Bloomberg TV  was out with a very interesting statistic this morning which I heard while out for a jog.  I tried to find it on the website when I was done but so far have had no luck doing so.  Anyway it was something along these lines.  Being labeled by Bloomberg the "sweet spot" they stated that something like 67% % of stock gains came during earnings season.  Stocks on average gained something like over 3% during this period and declined a bit over 1% the rest of the quarter.  They used the illustration of a bat as reference, putting that 67% number in blue.  Again I don't have a link for this, I'm sure they sited somebody else's work, I'm assuming the data is accurate and my numbers may be off slightly, but the gist of the story remains correct.  Here are a couple of my take aways on this.

Wall Street is data driven and the only real point of clarity anymore is earnings season so it makes sense that stocks will react this way especially to positive numbers.

Companies today are well versed in the art of under promising and over delivering.  This can really come to the front when they report especially if they manage an "upside surprise" by a pretty hefty number.

The 2nd quarter will be in the books as of Friday.  It will be interesting to see how stocks react particularly as analysts have been busy lowering their numbers for many companies going into the quarter.  I can see this going a couple of ways.  First a weak earnings season could further pressure stocks.  However stocks have already had a pretty hefty decline this quarter so it is possible that much of this is already discounted in stocks.

The other side of the trade is that its possible that a better than expected season places a floor under stocks and possibly lead to a summer rally.  Forward guidance is going to be very important this quarter as investors will want to see what effects a slowing US economy and how the EU situation is impacting  companies' bottom lines.

Again I apologize that I do not have a link to this story or the author they sited.  Please forward both to me if you come across it and I will put it up here on the blog.