Whenever the stock market rises to a high level, the market will be flooded with so-called “plunge indicators”, and the latest Bank of America warns that the stock market’s reaction to earnings has hit the worst level since the Internet bubble in 2000!
According to statistics, 66 S&P component companies have released their earnings so far, accounting for 22% of the S&P’s earnings, with 73% of them beating market expectations in terms of revenue and profits.
Yet a bizarre phenomenon is worrying Bank of America, as the shares of companies that delivered results that exceeded expectations are underperforming the market, with these companies underperforming the S&P by an average of 1.6% on the trading day after the results were announced. The anomaly also shows that if earnings guidance is raised, it triggers a runaway loss in the market as well, and what’s even crazier is that companies that miss both revenue and profit expectations manage to run after the results come out!
Investors need to know that the last Time a similar situation occurred in the second quarter of 2000, the S&P plunged 13% the following quarter as the Internet bubble began to burst.
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