EmailIt was a washout on Tuesday. Every sector finished with a loss; oil prices dropped sharply; and the major averages closed near their lows for the session. Even Apple (AAPL), which had a major product introduction that amounted to making something old look new again, declined 3.3%.
The S&P 500 fell 1.4%.
The early indication is that a rebound effort will be forged when trading begins. Currently, the S&P futures are 0.3% above fair value.
There are several explanations for the positive disposition:
- European markets holding up despite weak PMI data and a lower-than-expected business sentiment figure out of Germany
- An HSBC Flash PMI reading for China that was improved from last month (49.1 vs. 47.9)
- An expected reminder from the FOMC at 2:15 ET today that it will continue its extraordinary policy support
- Better-than-expected earnings from Facebook (FB)
What it really boils down to, though, is a conditioned response to buy on weakness.
The S&P 500 has fallen 3.3% over the last four sessions. For many, that qualifies as a full-blown correction knowing the Fed put is in place.
Truth be told, there hasn't been any real improvement in the earnings messaging. A good number of companies reporting after yesterday's close have topped consensus earnings estimates, but have done so on either weak or no revenue growth. The table below is a representative snapshot of this prevailing trend.
| Company | Symbol | Beat by | Revenue Yr/Yr |
|---|---|---|---|
| Norfolk Southern | NSC | $0.01 | -6.8% |
| Juniper Networks | JNPR | $0.05 | 1.1% |
| Unisys | UIS | $0.17 | -14.0% |
| Hanesbrands | HBI | $0.05 | 2.8% |
| AT&T | T | $0.02 | -0.1% |
| Corning | GLW | $0.02 | -1.8% |
| Kimberly-Clark | KMB | $0.02 | -3.4% |
| Lockheed Martin | LMT | $0.36 | -2.1% |
| Motorola Solutions | MSI | $0.11 | 3.3% |
| Dr. Pepper Snapple | DPS | $0.07 | -0.1% |
A number of companies have warned for the fourth quarter or full year. Positive guidance has been the exception, as Tupperware (TUP), Boeing (BA), and Panera Bread (PNRA) have shown.
The market will understandably reward good results and guidance. In turn, it also understandably looks to keep selling efforts in check, because it knows the Federal Reserve has its back.
Fundamentals matter though, and this generally poor reporting period has put the market on notice that big penalties can be doled out when stock prices run ahead of those fundamentals and companies don't live up to expectations inflated by a liquidity premise.
