Given the market turmoil we’ve seen since the start of the year, you may be surprised to hear that the average stock that has reported earnings this season has gained an average of nearly 1% on its earnings reaction day. (For those new to Bespoke, an “earnings reaction day” is the first trading day following a stock’s earnings report. For a stock that reports earnings in the morning before the open, its earnings reaction day is that trading day. For a stock that reports earnings after the close, its earnings reaction day is the following trading day.)
Below is a look at the average “earnings reaction day” percentage change for stocks by sector so far this earnings season. Notably, stocks in the Materials and Energy sectors that have reported earnings have averaged huge jumps on their earnings reaction days, meaning that negative earnings news looks to have already been priced in leading up to the reports. Investors have been quick to bid up Energy stocks by an average of 6.31% on their earnings reaction days! The Industrials sector is another one that has gotten demolished over the last few months, but we’re seeing investors buy these stocks after they report earnings this season as well. They’ve averaged a gain of 1.66% on their earnings reaction days.
While Energy, Materials and Industrials stocks are catching bids on earnings this season, Health Care stocks have gotten hit hard. As shown in the chart, they’ve averaged declines of 2.3% on their earnings reaction days. Health Care has been the hottest sector of the market over the last couple of years, but lately it’s been dropping like a rock. This earnings season, regardless of the actual earnings numbers, investors have a “sell first” mentality that is weighing on shares.