Earnings season may need Big Tech before stocks wake up
Jefferies says history points to stronger S&P 500 moves in weeks three to five of earnings season, after a muted opening stretch.
By Sal Moretti · Money Reporter
3 min read
The S&P 500 has started earnings season in the red, but Jefferies says the market’s real test may still be a week away.
After the first week of second-quarter results, the benchmark index was down 1.5%, according to MarketWatch. Reports had already arrived from major banks including JPMorgan Chase, Bank of America and Morgan Stanley, along with Netflix and UnitedHealth.
Andrew Greenebaum, senior vice president of equity research product management at Jefferies, wrote in a Saturday note that history suggests earnings usually begin to lift the broader market later in the reporting period, especially in weeks three, four and five.
Jefferies studied S&P 500 performance during earnings seasons going back to 1990. The firm found that the index has tended to move only modestly in the first two weeks, gaining an average of 0.14% in week one and 0.05% in week two.
Then the action typically picks up. Greenebaum said the S&P 500 has historically climbed by about 0.30% per week from the third through fifth weeks of earnings season, leaving the index up more than 1% on average after the first month.
Big Tech takes the mic
The calendar is about to get heavier. Alphabet and Tesla are scheduled to report results on Wednesday, according to MarketWatch. Microsoft, Meta, Apple and Amazon are set to follow next week.
Greenebaum said the timing matters because the first two weeks of the reporting period tend to line up with Wall Street’s two-year projections, which he described as tilted lower. During the third week, when the largest technology companies often release results, the S&P 500’s two-year outlook has risen by nearly 2% on average, according to his analysis.
Week five also has a role in the pattern. Greenebaum said that part of the season usually includes large retailers, software companies that report on different schedules and analysts’ sector roundups, all of which can feed into forward-looking research and revisions.
A quieter run-up may help
Jefferies also looked at how stocks behaved before the reporting period began. Greenebaum said the S&P 500 gained 43 basis points in the month before JPMorgan Chase reported results, about half the average advance seen across the past 36 years.
That softer lead-in has historically lined up with stronger earnings-season gains, according to Greenebaum. He wrote that when pre-season performance was below average, the benchmark’s earnings-season performance was close to twice as strong, at 260 basis points versus 130 basis points, and was positive more often.
The analysis does not guarantee a repeat this quarter. It does, however, put the market’s sluggish first week in context: Jefferies’ historical data says the opening act is often quiet, while the bigger market reaction tends to arrive once the largest technology names and later-cycle reports hit investors’ screens.
This story draws on original reporting from MarketWatch.