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The Sniff Test: Earnings beats are concealing bad results

Investors shouldn’t be fooled by this season’s “better-than-expected” earnings—they are still pretty bad.

With nearly 90% of the S&P 500 companies having reported second-quarter results through Friday morning (437 out of 505), aggregate earnings-per-share for the group are on course to decline 3.5% from a year ago, according to FactSet.

Many Wall Street strategists are pleased, because that is a lot better than expectations of a 5.5% decline on June 30, just before earnings reporting season kicked off. So are investors, as the S&P SPX, +0.74% and Nasdaq Composite Index COMP, +1.03% rallied into record territory, and the Dow Jones Industrial Average DJIA, +0.89% was less than 0.5% away, in afternoon trade Friday.

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