T3’s Market Wrap: Earnings Are Stellar, but Facebook Weighs on the Market


Earnings season is going great — but sluggish tech stock action is weighing the market down.

According to FactSet, 53% of the S&P 500 have reported second-quarter earnings, which means the quarter is pretty much in the bag.

83% of companies have beaten earnings expectations, while 77% have beaten sales expectations. These numbers are well above historical averages.

For the past couple of quarters, the bears have been rolling out the usual “things can't get better than this” argument in regards to earnings, and they're being proven again.

Let's dig in a little bit.

Blended* earnings growth has been 21.3%, beating the 20% growth expected back on June 30. Telecom Services, Utilities, and Health Care sectors are most consistently reporting earnings beats, while the energy sector is at the bottom.

(*Blended combines actual results for companies that have reported and estimated results for companies that have
yet to report)

Plus, while the broader markets are see-sawing a bit, the market is actually rewarding positive EPS surpises. Companies that beat estimates have seen an average 2-day price increase of 1.5%, which is above the 5-year average of 1.0%. That's not a huge difference, but it's still good news.

While earnings season has been strong overall, there have been some high-profile misses — Facebook (FB) being the biggest.

Facebook dove at the open today, dragging tech along with it. As you can see on the chart, Facebook looks like it may be in danger of attacking the $164.30 reaction low from after Wednesday's earnings report.

Twitter (TWTR), another big tech earnings disappointment, also fell hard at the open today.

Tech significantly underperformed the broader averages, which is exactly what the bulls don't want to see.

On the positive side, the Russell 2000 actually outperformed, though clearly, traders are concerned about the sluggish action in tech.

Pending Home Sales rose 0.9% in March, easily exceeding the 0.1% consensus. This was a nice follow-up to Friday's strong GDP print.

And like Friday, the market sold the news initially.

Crude oil blasted back over $70 today due to strikes on Total's North Sea platforms and other news issues. That had energy and oil service stocks up nicely.