Investors’ willingness to overlook earnings misses– and bid up shares of businesses that exceed earning expectations—is lifting the overall market. This according to a recent article in The Wall Street Journal.
The article cites FactSet data showing that “shares of companies that topped analysts’ forecasts rose an average of 2% in the two days after reporting results, beating the five-year average of 1%.” It adds, “those that fell short have averaged a 2.1% pullback, below the half-decade average of 2.6%.”
FactSet data also shows that, as of earlier this month, the majority of the 358 companies in the index have beaten estimates, and two-thirds have risen in subsequent trading sessions–a five-year high. While tech companies have continued to drive most of the gains, the article notes that industrials, financials and health-care companies have also risen.
The article says, “the upbeat reactions are due in large part to investors getting a more positive picture of American corporations’ health than that painted by analysts in the months leading up to third-quarter-reporting season.” At the same time, it says, investor concerns over U.S.-China trade tensions and Brexit have eased somewhat and are feeling bolstered by the Fed’s apparent intention to keep rates low.