Q1 earnings may be weighing down markets: Top Takeaways

The S&P 500 (^GSPC) edged lower on Thursday, closing out the trading day in the red for the fifth consecutive session. Yahoo Finance Markets Reporter Josh Schafer provides insights into how incoming earnings season results are impacting forecasts and the performance of the major market index.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video transcript

JULIE HYMAN: The S&P 500 though closed lower for the fifth day in a row now hovering near the 5,000 level. Josh Schafer here with the takeaways from the trading day. Josh, when's the last time we had five down days?

JOSH SCHAFER: Not in 2024, Julie.

JULIE HYMAN: Wow.

JOSH SCHAFER: I don't quite have the stat for how far we can--

JULIE HYMAN: I'm not looking it up while you're talking.

JOSH SCHAFER: How far we can go back beyond 2024. But it has not happened this year was the stat. We currently have on our website.

But beyond that, it goes back a little bit further, I think, than just maybe that start of the year. We only had a four day run of losses to start the year. But guys, I actually wanted to stick with earnings a little bit. And we can talk maybe a little bit more about Netflix here sort of as a takeaway thinking about it from a broader market perspective.

Because one thing we've seen thus far You. Guys were talking with Julian Emmanuel earlier in the hour from Evercore. And he said he's starting to feel like at least thus far in earnings season. Maybe good news isn't even good enough.

He was talking about JP Morgan's earnings, which a lot of people read through as a pretty good report. But just not quite meeting the expectations of where we've gotten so far. What you're looking at on your screen now is how stocks have reacted in the day following earnings. This was prior to today.

But you can see stocks that miss on revenue and earnings obviously getting crushed right now on a historical comparison. When they beat, it's been OK. Not necessarily great. And it will just to me, I think, tell us a lot about where investor sentiment is right now to maybe see how Netflix reacts to this report, which you guys just went through the numbers. I mean, on the surface, it seems like a pretty good report that sort of backs up why the stock has rallied over 100% last year.

- You know something else not just with the reactions that Julie flagged that we had in that graphic there. But we've seen from a few other strategists talking about, have earnings expectations come down enough? Because the traditional way that things work is as the quarter goes along companies, try to talk down their hurdle basically. And then analysts oblige, and they bring down estimates, and then you get a nice beat.

And then the stock goes up, and everybody's happy. But we haven't seen a huge downward revision. And given how harsh companies have judged not only a miss, but also been less enthusiastic about a beat, it feels like as we head into these next two weeks. Not only on an index level, but a single stock level for sure. There's a lot more fragility in there.

JOSH SCHAFER: When you think about the tech stocks. The big tech stocks that we talk about all the time that have driven this rally. Met his earnings are expected to grow over 100% this quarter.

NVIDIA's earnings are expected to grow several hundred percent this quarter. At some point, it's just a very high hurdle. I mean, Netflix just beat their high hurdle.

- I mean, they just reported streaming subscriber growth that was double what was expected. And the stock is not unanimously. There's not a 100% surety that this is actually good. You we've seen the stock trade on both sides of flat line. We're back down almost 5%.

JOSH SCHAFER: In last quarter, it was a little bit of a different story before we had more of a rally in the stock of Netflix itself. The stock gapped up pretty good after earnings. So I just think maybe it's telling us something about sentiment.

JULIE HYMAN: I found the answer. The last five session decline we had was only last October. So it hasn't been that long. The five sessions ended October '23. That's all. I just wanted to tell you I did my homework and found out.

JOSH SCHAFER: So the market's bottoming because that's when the market bottomed last?

- Well, that's when the 10 year stopped going up. So, you know, we need a rally in the bond market.

JOSH SCHAFER: A rally in the bond market could be good for investors.

- To create a rally in stock market.