The second-quarter earnings reporting season is currently vibrant, but the stock market is reacting quite weakly despite many companies exceeding expectations.
Many large companies in the financial, technology, and consumer sectors report positive results, but investors demand more: not just good but excellent results with a clear future vision.
MAIN CONTENT
The market has almost fully priced in all good news, resulting in very limited reactions to positive business results.
The gap in handling results that exceed expectations and those that miss has reached its largest in nearly three years due to high stock valuations.
Consumer purchasing power maintains a foundation for results, but is not enough to create momentum for investor increases.
Why does the stock market react weakly to good business results?
According to Bloomberg Intelligence, financial firms like Goldman Sachs, Morgan Stanley, and JPMorgan Chase all exceeded second-quarter profit expectations with a beat rate of up to 94.4%, but the market almost 'ignored' this result. Current stock valuations are very high, leaving investors with little incentive to buy.
"With current valuations, good news has already been reflected in stock prices,"
Greg Taylor, Investment Director at PenderFund Capital Management, 2025
Although companies like PepsiCo and Delta Air Lines received stock rewards, most did not experience price growth when reporting exceeded expectations. Julian Emanuel at Evercore ISI believes that good business results are no longer sufficient to stimulate significant volatility in the broader market.
What is the gap in how results that exceed and miss expectations are handled in the current market?
Michael Arone, Chief Strategist at State Street Investment Management, shares that the gap in handling failed and successful results has reached its highest level in nearly three years, with penalties for failing companies becoming increasingly severe due to high market valuations. The tolerable error margin for businesses today is almost very small.
This explains why many companies, despite achieving revenue and profit as forecasted, do not receive positive reactions from investors.
Why is consumer purchasing power still seen as a bright spot but does not stimulate investors strongly?
Mark Malek, Investment Director at Siebert, believes the banking sector is a measure of broader economic health, indicating that the economy is still maintaining some positivity. Companies like PepsiCo, Levi Strauss, and Netflix all affirm that consumer demand remains steady, even under the pressure of inflation and high interest rates.
"The banking sector is only healthy when the economy is strong; their results are a measure of overall economic health,"
Mark Malek, Investment Director, Siebert, 2025
The U.S. Commerce Department also reported a 0.6% increase in retail sales last month, stating that this reinforces the argument that purchasing power continues to hold firm despite two consecutive months of decline beforehand.
What risks and expectations are dominating the market in the upcoming weeks?
The schedule for the next quarterly earnings announcements will include many large companies such as Alphabet, Tesla, Honeywell, Dow, Lockheed Martin, Northrop Grumman, and General Motors. High expectations are putting significant pressure on businesses, with the risk of negative reactions from investors if they do not deliver outstanding results.
Initially, analysts forecasted S&P 500 profit growth of about 9.5%, but it has now dropped sharply to only 3.3%. Furthermore, current trade tensions could also negatively impact companies subject to tariffs.
Real-world examples illustrate the current market trend.
Company Results Stock Reactions Goldman Sachs Highest securities trading revenue in Wall Street history Almost no movement Morgan Stanley Profit exceeds forecasts JPMorgan Chase Second quarter best in history for stock trading and bond income Decreased 0.7% Netflix Exceeds all key metrics Decreased over 5% PepsiCo Strong results, exceeding expectations Stock increased Delta Air Lines Strong growth, optimistic travel forecast Stock increased
Frequently Asked Questions
1. Why does the market not react strongly to results that exceed expectations?
The market has already priced in most of the good news, resulting in limited reactions even when companies report positively.
2. How does high stock valuation impact investor reactions?
High valuations reduce the potential for price increases, while also making investors handle failures more harshly.
3. How does consumer purchasing power affect corporate results?
Consumer spending continues to provide a solid foundation for revenue, even though it does not strongly stimulate the market to increase.
4. What notable names are on the schedule for next quarter's reporting?
Major names include Alphabet, Tesla, Honeywell, Dow, Lockheed Martin, Northrop Grumman, and General Motors.
5. Why is the gap in reactions between meeting and missing expectations widening?
Due to high market valuations, tolerable error margins are shrinking, and investors are increasingly harshly penalizing failing companies.
Source: https://tintucbitcoin.com/ky-vong-gia-khien-thi-truong-yeu-phan-ung/
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