Corporate Earnings and Economic Strength

This has been a high-profile week for corporate earnings, with highly anticipated reports from Apple, Caterpillar, McDonald’s, AT&T, UPS, and the first ever earnings report from Facebook. The results were mixed, adding to the common trend of an uncertain earnings season.

What does this actually tell us about the strength of the economy and future market performance? In regards  to the markets, we saw disappointing results from tech giant Apple virtually shrugged off by the markets as a whole as part of a substantial rally in the second half of the week. The individual stocks in question have been directly impacted, both positively and negatively, as you would expect. As part of the big picture, however, the markets are seemingly more concerned with developments in the ongoing issues in Europe than with earnings reports for even the largest, most significant companies.

As a whole, however, earnings season has been a bit more concerning. After a few years of companies generally reporting great earnings and revenues, the results for even the best-performing companies have been more disappointing, with many reporting disappointing revenues or cutting their future outlooks for revenue and profit. This suggests an expectation of future lagging in consumer spending in an already slow and drawn-out recovery from the recession.

Still, the markets generally seem to be less concerned about this trend than European news so far, but it is certainly something to pay attention to in future quarters.


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