Combining data from FactSet and Bloomberg it is noteworthy to see that Q1 sector performance in stocks have not followed earnings-growth. Currently 95% of the S&P 500 have reported Q1 earnings and earnings have been weak to say the least… At a 6.8% decline.
When we drill down to individual sectors you would think that the sectors with the weakest earnings (largest decline in earnings) would struggle most. Apparently not. Check the breakdown below courtesy of MarketWarch.
| S&P 500 sector | Percentage change in sector performance since March 22 | First-quarter earnings growth (FactSet) |
| Utilities | 8% | -3.0% |
| Energy | 4.7% | -107.2% |
| Health Care | 2.3% | 7.1% |
| Financials | 2% | -12.3% |
| Materials | 1.9% | -14.4% |
| Consumer Discretionary | -0.5% | 19.5% |
| Consumer Staples | -0.6% | 1.3% |
| Industrials | -1.7% | -5.3% |
| Tech | -2.8% | -6.1% |
| Telecom | -3.9% | 16.6% |
Why would this happen? A number of factors can be used to explain these disconnects… Differing expectations for the quarter, future projections (especially when it comes from the energy sector and underlying commodity prices), share price movements before March 22nd and a number of technical charting reasons but the overwhelming fact is that earnings are decreasing. This just goes to show that when looking at short term price moves, fundamental factors, even those as major as earnings can have minimal to zero impact.