Market Ignoring Very Good Earnings

Corporate earnings are tracking at more than 18 percent higher.

Nevertheless, the #stock market averages are little changed since the start of earnings season.

Corporate America is well on its way to what could be a record-breaking profit season.  However, apparently investors don’t really care.  Despite earnings growth of more than 18 percent and an 80 percent beat rate, the market is little changed.

“It is pretty amazing when you look at it.  We are in an earnings season that’s having an equal and opposite reaction to results.” This according to Art Hogan, chief market strategist at B. Riley FBR. “It’s a very difficult market to please right now.”

Why is that?  Earnings reports are a look in the rearview mirror.  This is showing companies getting a lift from tax cuts that will level off over time.  However, the big boost in quarterly earnings likely to continue through 2018 will be tough to top in 2019.

Among investor concerns are the looming possibility of a U.S. trade war with China.  Furthermore, rising bond yields briefly saw the benchmark 10-year Treasury note yield pass 3 percent Tuesday.  There is also concern about a potentially more aggressive Federal Reserve, which could raise rates as much as four times in total before the year ends.  That means that investors are looking past the earnings reports and envisioning a potential deceleration ahead. 

10-year #Treasury yield tops 3%.

A 3% yield is seen as a significant milestone that could weigh heavily on the markets.

“It’s certainly a psychological level for people.” “We have a lot of supply this week, and that’s certainly putting pressure on the market … the quarterly refundings have been settings records.”  This according to Gary Pollack, head of fixed-income trading at Deutsche Bank Private Wealth Management.

The yield, a barometer for mortgage rates and other financial instruments, has jumped in April on signs of nascent inflation and as the Federal Reserve stood by its plan to gradually tighten monetary policy. A move in the yield above 2.9 percent in February triggered a correction for U.S. stocks.

Some observers believe that the 3% yield has already depressed European markets.

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