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Posted by on Jul 22, 2015 in Laif Meidell, Market Insight

It’s Earnings Reports Season

It’s Earnings Reports Season

By Laif Meidell, CMT, president of American Wealth Management, and portfolio manager of the AdvisorShares Meidell Tactical Advantage ETF (MATH)

It’s that season again, when corporate stocks are known to rise or fall several percentage points in a matter of minutes following the release of their earnings results from the prior quarter. Following last quarter’s news, the CEO gives his best guess (they call it a forecast) as to how much money the company is expected to make in the coming quarter.

Granted, the outcomes of each company’s news release can be a little confusing, especially when a company reports great quarterly earnings, then gives a conservative forecast of expected earnings only watch its share price plummet in afterhours trading. Of course, there is always the occasion when earnings are exceptional but investors expected more, and once again push the stock price over a cliff.

There are good surprises during earnings season as well, but managing investor expectations is a challenging task for any CEO.

Stocks retreated on Tuesday following disappointing earnings released after the close on Monday from some blue chip companies, as investors turned their attention from Greece to corporate earnings.

Being comprised of only 30 stocks, the performance of the Dow Jones Industrial Average at times can be skewed by just one or two companies, and Tuesday was one of those days. Pushed lower by a company that came in below its quarterly earnings expectation, and that investors vigorously sold on the news, the Dow Jones Industrial Average underperformed the other major average falling 1 percent on Tuesday versus the Nasdaq Composite which declined by 0.21 percent on the day. The Nasdaq Composite had risen seven out of the past eight trading days, making it ever more likely that the index would back away from its recent all-time highs before trading higher.

With over half the year behind us, the S&P 500 is higher by 2.92 percent from the start of the year through Tuesday’s close. Surprisingly, the S&P sector that has been doing most of the heavy lifting is healthcare, gaining over 12 percent year to date. With the health care sector making up roughly 15 percent of the S&P 500 this means that this one sector is responsible for approximately 61 percent of the index’s return so far this year.
This commentary originally published in the Reno Gazette-Journal. Performance numbers used in this article were obtained through eSignal and are not guaranteed to be accurate.

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.