Nearly 2,500 companies have reported earnings since the current earnings season began, and the average stock that has reported has actually fallen 0.82% on its earnings reaction day.  Notably as well is that stocks that have reported have continued to fall even after their initial earnings reaction day.

Below is a chart detailing this trend.  As shown, companies that have beaten earnings estimates have averaged a small gain of 0.81% on their earnings reaction days this season.  Companies that have missed EPS estimates have gotten hit hard, however, with a one-day drop of 3.61%.

Once the initial earnings reaction day passes, investors have been hitting the “Sell” button, regardless of whether the company beat or missed.  While stocks that have beaten EPS have averaged a small gain on their earnings reaction days, they’re down an average of 2.63% since then.  That’s actually worse than the average decline of 2.02% that stocks that have missed EPS estimates have seen since their earnings reaction days.

There’s been lots of commentary about this being the strongest earnings season in years in terms of actual earnings growth.  But based on how stock prices have been reacting to their earnings reports, it looks like that strength was fully priced in well in advance of the start of the third quarter.

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