The one thing all reality shows have in common is a big “reveal.” They generate a high level of tension as they prepare to make an announcement and then just as suspense is elevated to the highest point, they cut to a commercial. Well, every three months, at the start of each new calendar quarter, something similar happens on Wall Street.
Companies that are publicly-traded (i.e. stocks) announce their earnings for the previous quarter. Additionally, they often provide some indication, or guidance, as to the outlook for their company for the upcoming quarter. The parade of earnings announcements lasts about 6 weeks and usually begins with Alcoa and ends with Walmart. Adding to the suspense is the fact that earlier in the quarter, Wall Street stock analysts issue earnings estimates or targets. As earnings announcements get closer, analysts often tweak their estimates. Then, the big reveal arrives, as companies announce their earnings. The volatility of individual stocks, and the stock market in general, usually picks up during this 6-week period because companies either hit, miss or exceed their earnings targets. We officially entered reporting season this week, so market swings (up and down) will likely rise. The market is currently in an uptrend so near-term volatility, although not fun, is not too great of a concern as long as the uptrend continues to be intact. Earnings have been weak for so long that any improvement should be welcome by the markets. Stay tuned!