Investors have lost interest in the glorious second-quarter earnings season for American companies.
A large number of S & P 500 companies' profits have exceeded Wall Street expectations, but their share prices have barely changed. This is the second quarter in a row that investors have been indifferent to the gratifying performance, adding to fears that US stocks, which have risen 18 per cent this year, may have to pull back.
The lukewarm market reaction came as novel coronavirus's delta strain spread and Wall Street banks themselves delayed plans to return to the office. Amazon, which usually drives the benchmark index higherAnd other tech giants have also tumbled recently.
"the earnings season shows that a lot of good news has been digested," said Bank of America.Equity strategist Jill Carey Hall said in an interview on Friday. "for companies that have outperformed expectations, stocks have not outperformed by much."
Most of the S & P 500 stocks have reported results, with 85% of them beating expectations, according to the data. On average, their shares rose 0.2% the day after the results were announced. This is similar to the trend in the first quarter, when the average performance fell 0.1 per cent the next day.
Against the backdrop of the S & P 500's rise to a new high, investors have so far turned a blind eye to the concerns that are brewing. Although valuations are historically high, price inflation is likely to persist, monetary stimulus is likely to shrink, and Covid-19 infection rates are rising, the focus of the market has been on continued growth in corporate earnings andThe forecast that interest rates will remain low.
Goldman SachsStill bullish on US stocks. The bank cited these two factors last week to raise the S & P 500 year-end target. Strategists led by David Kostin predict that the index could close at 4700 by the end of the year, meaning it is up nearly 6 per cent from Friday's close; the bank's previous estimate was 4300.
"We believe that as companies successfully manage costs and high-margin technology companies play an increasingly important role in the index, revenue growth and pre-tax profit margins will be stronger than consensus expectations," strategists wrote in a research note.
The big five technology companies account for more than 1/5 of the S & P 500, but the initial performance of technology stocks was particularly weak after the earnings report. 94% of the technology companies that have reported earnings so far beat expectations, but their share prices fell by an average of 0.6% the next day, according to the data.
"when valuations are so expensive, profits really need to go up," said Gina Martin Adams, chief equity strategist for industry research. "the profits of technology companies are indeed rising, but the problem is that other companies are also rising."