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Earnings Have Been 'A Little Bit Behind the Eight Ball'

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J.D. Durkin: Of the 56 companies that have reported so far, 64% have topped Wall Street's estimates. Martin as the earnings season shaping up to be a bit better than maybe many would have anticipated. What's going on there, based on those numbers, is that not much of a surprise?

Martin Baccardax: No, only a tiny bit better. Essentially, that percentage matches the long term average. So we're right about where we should be, but it trails quite notably the average that we've seen, at least at this point over the past four quarters. If we were to look at the past four quarters, the beat rate is about 75% So we're down in that 65% range. It is early on, so we have lots to play for over the next 5 to 10 trading days as a result. But we're a little bit behind the eight ball and as a result, we have seen the expectation for profit growth eroding at the same time. This time last week, the anticipation was for earnings to fall about 2.2% from last year's levels. That's fourth quarter to fourth quarter. 

The expectation now is that's going to be down about 2.9% And if you strip away energy sector, which is too volatile. And is best to look at on a standalone basis, that decline is going to be about 7.3% So it may end up being a little bit weaker than we anticipated. But ultimately, J.D., I think that has largely been priced in. What we are really focused on now, or at least I think investors are going to be focused on is the forward projections from all of these companies. That's why the tech narrative will be exceedingly important, and what we see and hear from CEOs of these industrial companies, health care companies, car makers, airlines and all the rest of it about consumer and business demand in the coming months will be the most crucial takeaway from the season itself.

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