Tuesday, January 21, 2014

What Ails the Market?

The stock market has stumbled a bit out of the gate this year, with the S&P 500 having slipped a little, down by 0.5 percent. There's a specific problem weighing down stock prices: Earnings reports have been mediocre thus far. Of the S&P companies that have reported earnings for the fourth quarter of 2013, just 52 percent have beaten Wall Street estimates.

That might sound OK, but veteran stock watchers know that 52 percent is a poor figure. Companies do everything they can to make sure they beat the analysts' estimates on earnings day. Over the prior four quarters, 67 percent of reporting companies beat their estimates.

The one silver lining is that it's early yet. Only 52 of the companies listed in the S&P have reported yet, or just over 10 percent. We'll be watching to see if the number of earnings beats rises to a more normal level.

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