Do Earnings Matter? This Week, We Might Find Out.


Chief Strategist at Interactive Brokers

Equity markets will get an important test this week. With over 25% of the market capitalization of the S&P 500 Index (SPX) and over 50% of the NASDAQ 100 Index (NDX) expected to report earnings on upcoming days this week, we will get to find out if earnings actually make a difference to equity valuations in the current market environment.

Some of the true market heavyweights are expected to report their earnings on upcoming days. I prepared a table listing this week’s releases among the top 25 weighted companies in the SPX and NDX indices. I also selected some of the many other notable names reporting this week. This is only a partial list, selected somewhat arbitrarily based on my opinion of a company’s likelihood for influencing market psychology as a whole. I urge you to check the earnings dates for each of the companies in your portfolio if you have not already done so.

Expected Earnings Releases for Important US Companies

Source: Bloomberg

It has been my assertion that equity investors have been concerned primarily with the flow of money from world central banks and secondarily with performance chasing that has led to narrow market leadership and a potentially unhealthy concentration in the most highly capitalized companies. This week is a true test of that theory. If these companies can beat expectations, investor enthusiasm is likely justified. If they shrug off missed expectations, it shows that money flows and momentum reign. And if the companies sell off on either result, then we could potentially see a painful reset of investor expectations.

Of course we could see a set of mixed results and murky forward guidance. If that is the case, then we will not have learned as much as we would like about the factors driving market performance.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers LLC, its affiliates, or its employees.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.