Stocks Ignore Negative Economic & Earnings Results

Stocks Ignore - Were Mixed On Thursday

S&P 500 was down 0.27% on Thursday, but that should be considered an amazing performance when context is given. The stock market came into the day overbought and the retail sales disaster report was released. 

You would think an overbought market would worry about the declining Q4 and Q1 GDP estimates, but it completely ignored that. It’s obviously not fair to say that stocks priced in this negative report with the decline in December because most of the bear market move has been rescinded.

It’s possible that the stock market decline caused the weakness in retail sales. But consumer sentiment was weak in January which was after the volatility ended. There was a modest pickup in last week’s consumer comfort report, but that might not be a new trend. 

On the one hand, consumers being nervous about the stock market, even after the rally, could be positive. It signals there’s more room to the upside.

 On the other hand, it could mean the political uncertainty and bear market could have a long tail effect on the economy. I might be overanalyzing the retail sales report from 2 months ago. However, I’m still curious about Q4 GDP growth.

The Nasdaq and Russell 2000 outperformed the S&P 500 as they were up 9 basis points and 14 basis points. The worst 2 sectors were the financials and consumer staples which fell 1.16% and 1.22%. 

This clearly wasn’t a risk off day as the utilities and consumer staples fell, while technology and communication services rallied. The 2 best sectors were real estate and healthcare which increased 0.45% and 0.23%. Finally, the industrials underperformed as they fell 0.55%.

Stocks Ignore - Earnings Results Aren’t Great

Q4 2018 earnings results have been bad and estimates for the next 3 quarters have fallen sharply. The only positive is Q4 2019 estimates are increasing. However, they are increasing for a bad reason as Q4 2018 results haven’t been great. 

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