Apple, Intel, Microsoft, Caterpillar, Dell, Bank of America and many other companies beat their earnings forecasts.
That is good news, but will this translate into higher stock prices? Time will be the ultimate judge, but for right now, it seems like we might see a sell off similar to what occurred earlier this year in January and April.
Enthusiasm preceding this earnings season has been the same as in April and January.
Two headlines in April read: “Wall Street Gets Lift from Higher Earnings” (from the Associated Press) and “JPMorgan Earnings Increase 55 percent on Outlook for Economy” (from Bloomberg).
Two headlines from this month read as follows: “U.S. stocks Rise on Speculation Earnings Will Trigger Rebound” (from Bloomberg) and “Earnings: Investors Hope for Good News, Look for Clues to Future” (from the New York Times).
In January, the major indexes declined 9 percent. And following the release of April earnings, the major indexes declined 17 percent or more.
Shouldn’t we know better by now and not bet the farm, even if earnings are positive?
One lesson to be learning is that higher profits do not translate into rising stock prices. After all, last-quarter earnings provide a snapshot of the last quarter, nothing more.