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Stocks Getting Ready For The Official Start To Earnings Season
The markets finished lower on Monday with stocks taking a breather after a spectacular 3-week rally.
But that breather may be short lived as the official start to Q4 earnings season kicks off tomorrow (Wednesday, January 16th), when Alcoa reports after the close.
As I've mentioned before, earnings season historically is a great time for stocks. In fact, over the last 9¾ years of this bull market, there have been 39 earnings seasons, and 28 of them (72%) have been up. So it looks like the gains are set to continue.
And we all know how stocks can soar if they positively surprise. It's not uncommon to see stocks surge 10%, 15%, or even 20% or more in one day on a fantastic report.
With stocks still trading at deep discounts from where they were just a few short months ago, and even years ago, we could see some explosive gains this earnings season.
Traders will continue to monitor trade talk developments between the U.S. and China.
It will also be interesting to see how the market reacts to the ongoing partial government shutdown, now in its fourth week. Traders have largely ignored it. But eventually, as more employees miss enough paychecks, it could finally start showing up in the economic reports. That could still be a few weeks or so away. But the market is forward looking, so it could be sooner rather than later.
The effects would be mostly transitory, as workers will ultimately get paid every dime they missed. But the disruption in spending is hard to predict.
In the meantime, the market will be transfixed on earnings. And if the early results come rolling in better than expected, the market will breathe a huge sigh of relief and the gains should continue.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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The markets finished lower on Monday with stocks taking a breather after a spectacular 3-week rally.
