In the early part of the current earnings reporting period that began back on October 12th, stocks couldn’t sniff a bid on their earnings reaction days. Since Monday, however, investors have been busy buying up stocks after they report.
Below we show how stocks within sectors performed on their earnings reaction days from the start of earnings season through the morning of October 29th. We also show how stocks have performed on their earnings reaction days since the close on the 29th. As shown, for all stocks that have reported, the average stock fell 0.91% on its earnings reaction day through October 29th. Since then, the average stock that has reported has gained 1.56% on its earnings reaction day. That’s a huge shift in sentiment around earnings reports. Investors have flipped from selling the news to buying the news.
There have been some interesting trends within sectors as well. Health Care, Materials, Energy, Technology, Consumer Staples, and Industrials stocks that reported got hit the hardest prior to the 29th. Since then, the cyclical sectors of this group (all of them except for Consumer Staples) have seen stocks fly higher by 1.3% or more on their earnings reaction days, while Consumer Staples stocks that have reported since the 29th have actually declined. Utilities and Communication Services stocks have averaged very small declines on their earnings reaction days over both time frames. Finally, Consumer Discretionary stocks have been a positive outlier throughout earnings season. Discretionary stocks that reported prior to the 29th bucked the trend and averaged gains on their earnings reaction days. And since the 29th, they’ve continued to see gains, averaging a one-day change of +2.1%.