Do Earnings Matter? This Week, We Might Find Out.

Equity markets will get an important test this week. With over 25% of the market capitalization of the S&P 500 Index (SPX) and over 50% of the NASDAQ 100 Index (NDX) expected to report earnings on upcoming days this week, we will get to find out if earnings actually make a difference to equity valuations in the current market environment.

Some of the true market heavyweights are expected to report their earnings on upcoming days. I prepared a table listing this week’s releases among the top 25 weighted companies in the SPX and NDX indices. I also selected some of the many other notable names reporting this week. This is only a partial list, selected somewhat arbitrarily based on my opinion of a company’s likelihood for influencing market psychology as a whole. I urge you to check the earnings dates for each of the companies in your portfolio if you have not already done so.

Expected Earnings Releases for Important US Companies

Source: Bloomberg

It has been my assertion that equity investors have been concerned primarily with the flow of money from world central banks and secondarily with performance chasing that has led to narrow market leadership and a potentially unhealthy concentration in the most highly capitalized companies. This week is a true test of that theory. If these companies can beat expectations, investor enthusiasm is likely justified. If they shrug off missed expectations, it shows that money flows and momentum reign. And if the companies sell off on either result, then we could potentially see a painful reset of investor expectations.

Of course we could see a set of mixed results and murky forward guidance. If that is the case, then we will not have learned as much as we would like about the factors driving market performance.