Roughly 2,100 companies reported earnings during the unofficial Q1 2018 reporting period that ran from April 9th through May 18th.  We track the one-day stock price performance of every company that reports earnings.  This obviously helps us monitor individual stock performance, but it also gives us an idea of how investors are reacting to earnings results at the macro level.  (In order to track performance, remember that for a stock that reports earnings in the morning before the open of trading, we use its price change on that trading day.  For a stock that reports earnings after the close of trading, we use its price change on the next trading day.)

Below is a chart that shows the one-day price reaction (%) for every stock that reported earnings during the Q1 reporting period.  We’ve separated the distribution by stocks that beat EPS estimates, missed EPS estimates, and reported inline EPS estimates.  As shown, 67.9% of stocks beat EPS estimates, while 24.5% missed and 7.7% reported inline.  The average stock that beat EPS estimates gained 1.78% on its earnings reaction day.  The average stock that missed EPS estimates had a one-day drop of 2.75% in response, while the average inline report saw a one-day price drop of 0.73%.

While the average stock that beat EPS estimates gained 1.78% on its earnings reaction day, you can see in the chart that there were hundreds of stocks that beat but still fell in price.  Similarly, while most stocks that missed EPS estimates fell on the news, there were plenty that gained as well.

For investors looking for detailed earnings report analysis, our Earnings Screener is an amazing tool.  The Earnings Screener allows users to pull up historical quarterly earnings report analysis for every US stock going back to 2001.  The Screener also allows users to track macro trends related to earnings using our “Aggregator” functionality.

The chart below uses data pulled directly from our Earnings Screener.  It shows the average one-day stock price reaction to various earnings outcomes during the Q1 2018 reporting period compared to all periods since 2001.  As shown, the average stock that beat EPS estimates this season gained 1.78% on its earnings reaction day.  Since 2001, the average stock that has beaten EPS estimates has gained 1.90% on its earnings reaction day.  So this season, earnings beats gained slightly less than normal.

For stocks that missed EPS estimates, this season they fell an average of 2.75% on their earnings reaction days.  Since 2001, stocks that have missed EPS estimates have averaged a one-day decline of 3.48%.  So this season, stocks that missed EPS estimates fell much less than they usually do.  Stocks that reported inline EPS fell a lot less than they normally do as well.  Combining the beat, miss, and inline outcomes, the average one-day change for all stocks that reported this season was +0.48%.  Since 2001, the average one-day change for all stocks that have reported earnings has been +0.08%.  That means that this season, stocks reacted much more positively than usual, and the reason was because the inline and missed reports fell less than they usually do.

To gain access to our Earnings Screener tool, please sign up for a Bespoke Institutional trial.  The Screener is only available at the Bespoke Institutional level.

Below are two charts for oil — a one-year chart and a fifteen-year chart.  As you can see in the one-year chart, the price of oil has been in a steady uptrend for the last eleven months.

The longer term chart for oil looks much different than the one-year chart.  Ten years ago, oil was trading above $140, so it’s about half that price right now.  Should price continue higher in the near-term, it’s next resistance level is $80, which is the bottom of the $80-$100 range that it traded in from 2010 through 2014.

While the large-cap S&P 500 remains in “correction” mode, the small-cap Russell 2,000 is in “breakout” mode.  At the end of last week, the Russell 2,000 managed to break above its early 2018 highs to finish the week at new all-time highs.

Below are two trading range charts of the Russell 2,000.  The first is a one-year chart, and the second is a three-year chart.  While the index is now “overbought” based on its current distance above its 50-day moving average, its chart pattern still looks quite bullish from a long-term perspective.

Small caps are generally considered to be a “leading” indicator for large caps, and if that’s the case this time, the S&P 500 has new highs in store as well.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

Europe

March of Italy’s mini-BoTs may split the euro by John Dizard (FT)

The populist coalition that’s set to form a government in Italy has proposed a very…”interesting” mechanism for funding public spending increases, and one that has some historical precedent. [Link; paywall]

Germany’s Great European Heist by Adam Tooze and Shahin Vallée (Project Syndicate)

While Germany is perfectly happy to demand a certain two-part fiscal and monetary discipline on the part of the Eurozone, but seems to completely reject that approach when it comes to defense spending. [Link]

Europe’s Data Protection Law Is a Big, Confusing Mess by Allison Cool (NYT)

A review of GDPR, the new EU directive covering the use of personal data by companies and other institutions. While this argument probably goes a bit too far, the broader point that execution has been lacking is worthwhile. [Link; soft paywall]

American Wealth

In the second Gilded Age, the mansions get bigger, and the homeless get closer by Rick Hampson (USA Today)

A survey of one particular consequence of soaring inequality in one particular facet of one particular city’s life: the link between income and wealth disparities on how people live and live with each other in Los Angeles. [Link]

How Much Money Do You Need to Be Wealthy in America? by Suzanne Woolley (Bloomberg)

Americans consider $2.4 million as the cut-off between being “wealthy” and being less than that per a new piece of survey data from Charles Schwab. [Link; soft paywall]

Malfeasance

Drone Maker Accused of Covering Up Bomb in Bag on Flight by Anders Melin and Brandon Kochkodin (Bloomberg)

A short-seller dug up an insistence where a drone company’s employee managed to get a drone equipped with explosives onto a Delta flight from Salt Lake to LA. [Link; soft paywall, auto-playing video]

The SEC Has an Opportunity You Won’t Want to Miss: Act Now! (SEC)

In an effort to make the public more aware of scam initial coin offerings (ICOs), the SEC has set up a website that appears to be a promotion of a scam coin. [Link]

Progress

Global surge in air-conditioning set to stoke electricity demand by Ed Crooks (FT)

A new IEA report argues that income growth in large, hot countries will create massive new electricity demand fueled by increasing use of air conditioners. [Link; soft paywall]

Drug target for curing the common cold by Michelle Roberts (BBC)

Researchers in the UK think they may have found a way to boost the body’s immune response as a way to combat the common cold. [Link]

Sports

A New Atlanta, United by Soccer by Ken Belson (NYT)

With enormous crowds and similar on-pitch success, Atlanta United is the most popular soccer team in America, and has risen in a town that seems like the polar opposite of a soccer hotbed. [Link; soft paywall]

Hall of Fame pitcher Jim Palmer long wondered if he’s related to JFK. At 72, he learned the truth. by Dave Sheinin (WaPo)

A baseball legend and the story of a genealogical treasure trove that eventually peeled back the onion of genealogy for the adopted ball player. [Link; soft paywall]

Business Models

How to Lease a $50,000 BMW for Less Than a Subway Pass by Gabrielle Coppola (Bloomberg)

With automakers incentivized by both policy and the need to win the next great automotive arms race, electric vehicles are available on the very, very cheap. [Link; soft paywall]

Inside the business model for botnets (MIT Technology Review)

Botnets are a big risk, but with millions on the line for willing sellers of DDoS attacks, click fraud, or spam, they can generate significant revenues for their operators. [Link]

F-AI-l

I Tried to Get an AI to Write This Story by Paul Ford (Bloomberg)

A lovely personal essay about the trials and tribulations of machine learning, both at the level of coding it and in the world at large. [Link; soft paywall]

Data Security

Digital Photocopiers Loaded With Secrets by Armen Keteyian (CBS)

Unknown to most users, photocopiers contain hard drives which log a copy of every job they process. When improperly disposed, those hard drives are a treasure trove of information like the one CBS found. [Link]

Investing

Jack Bogle’s Battle by Leslie P. Norton (Barron’s)

A long interview with the man who did more to democratize index investing than anyone else, the founder of Vanguard Group. [Link; paywall]

Emerging Markets

Franklin Templeton buys $2.25bn in Argentine bonds by Robin Wigglesworth and Benedict Mander (FT)

A survey of the outlook for Argentina, which is in the midst of its latest meltdown, this time in the form of a run on the currency, a ceiling on USDARS, and an appeal to the IMF. [Link]

Ice History

Rise and fall of Roman Empire exposed in Greenland ice samples by Katie Langin (Science)

Using samples from ice cores in Greenland, researchers have identified a series of economic booms and busts in antiquity that threw lead off into the atmosphere. [Link]

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Have a great Sunday!