A good way to gauge sentiment towards a sector is to look at how stocks are trading when they miss earnings estimates during earnings season.  Below is a chart showing this analysis for the ten major sectors.

As shown, the average Health Care stock that has reported earnings this season and missed earnings estimates has fallen 5.38% on its earnings reaction day.  Consumer Discretionary and Technology stocks that have missed estimates have averaged declines of 4.92% and 4.12%, respectively.  On the flip side, though, the average Energy sector stock that has missed earnings estimates this season has gained 0.64% on its earnings reaction day.  Yes, even Energy stocks that are reporting weaker than expected earnings are getting bid up by investors.

This tells us that sentiment towards Energy had gotten excessively negative heading into earnings season, and now investors are rushing to get back in.  For sectors like Health Care, Consumer Discretionary and Technology, sentiment was too positive heading into earnings season, and companies that aren’t able to meet or exceed expectations are getting crushed.

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