Are U.S. stock investors no longer in love? Regardless of whether Q3 performance meets the target or not, the stock price lags behind the broader market.

Raw Trading Ltd

U.S. stocks ended higher on Tuesday, as a string of solid corporate earnings and optimism appeared to fan investors' enthusiasm and spark a broad rally. But one piece of data points to a completely different reality.

According to statistics, among the S&P 500 index component companies that have announced Q3 results (about one-fifth), companies whose earnings per share lag behind analysts’ expectations have their stock prices lag the market by an average of 3.7% on the day when the results are announced. . This is the largest gap since the second quarter of 2019.

Companies whose earnings per share were higher than analysts' expectations were not optimistic, with their stock prices on average 0.6% lower than the S&P 500 on the day. This is the first time this has happened since the fourth quarter of 2020.

Investors have imposed stricter penalties on companies that fail to meet profit targets. At the same time, they have reacted coldly to companies that report good performance, which is completely different from the booming market.

This has also caused many analysts to worry that after two consecutive months of declines, the S&P 500 Index may continue to fall.

A vague sense of pessimism

This week, nearly a third of the S&P 500 companies will report results. Thomas Martin, senior portfolio manager at Globalt in Atlanta, said that the earnings season has just begun in full. The previous earnings report was obviously disappointing, but the next news is worth looking forward to.

However, Martin's feeling is actually not accurate. According to data from LSEG Research, 81% of the 118 S&P 500 companies that have released results to date have exceeded analyst expectations.

Stable and improving performance is obviously not enough to meet investors' expectations, and insufficient high-profile performance may even lead to market punishment.

Wall Street is also quietly showing signs of fatigue. While analysts are emphasizing their confidence in next year's earnings outlook, the number of downgrades significantly outweighed the number of upgrades in analysts' short-term revisions to the company's stock price.

Morgan Stanley strategist Michael Wilson warned that profit forecasts for the fourth quarter and 2024 of U.S. stocks are still too high, which reduces the possibility of a rebound at the end of the year.

Christopher Harvey, a strategist at Wells Fargo, pointed out that the company's executives frequently warned consumers to be cautious, and its outlook guidance was quite boring, which seemed to represent some negative signals.

He concluded that so far, only eight S&P 500 companies have raised their full-year forecasts, while seven have lowered their forecasts by at least 1%. In the previous quarter, 116 companies raised their guidance, and only 47 companies lowered their expectations. IC Markets