Strong earnings can’t calm investors

NEW YORK — Investors to corporate America: Meh.

US companies are reporting strong profits for the fourth quarter of last year. But most are failing to impress investors who were hoping for even better numbers or rosier outlooks, and who are too worried about larger global macroeconomic forces to do much buying.

‘‘Earnings season is going quite well,’’ said Christine Short, a senior manager at the research firm S&P Capital IQ. ‘‘But what we’re seeing in earnings season is not what we are seeing in the market.’’


With results in from half of the companies in the Standard & Poor’s 500 index, fourth-quarter earnings are up a respectable 7.3 percent, making it the best quarter of 2013, according to S&P Capital IQ. Of the 250 companies that have reported results, 172 companies have beaten earnings expectations and 51 have fallen short, a better ratio than average. Company revenues have also come in better than in the past relative to expectations.

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It’s just not enough for investors. The S&P 500 regained some ground Tuesday morning, but that followed a slide of 2.3 percent Monday. It is down 5 percent since earnings season kicked off Jan. 9.

Stocks rose almost unchecked in 2013, posting their highest gains since 1997. Because stock prices rose so high, that has investors on alert for any bad news. The slowdown of stimulus from the Federal Reserve, currency problems in emerging markets such as Argentina and Turkey, and slowing growth in China have served to ratchet up the worry.

Stocks fell Monday after a manufacturing survey showed weaker factory activity growth than expected and the Commerce Department reported that construction spending rose only modestly in December, slowing from more robust gains a month earlier.

‘‘The market has the jitters,’’ said Quincy Krosby, market strategist at Prudential Financial.


So, when companies share financial news that is less than terrific, shares get hammered.

Randy Frederick, an investment strategist at Charles Schwab, points out that the results for the last quarter so far are strikingly similar to those posted over the previous few quarters, but stocks are going down instead of up.

‘‘The quarter is the same, but the market reaction to it is different this time,’’ he said.

Last week, Amazon posted higher revenue and profit, but it failed to meet analysts’ expectations. It predicted revenue of $18.2 billion to $19.9 billion for the first quarter — not strong enough for analysts who all had forecast $19 billion or higher, according to FactSet. Shares are down 14 percent since Friday.

Apple beat Wall Street expectations for profit and revenue, but iPhone sales fell 3 million short of expectations — despite hitting a record 51 million. Also, the company cautioned that its revenue growth would soon slow. That led to an 8 percent drop in Apple’s stock.


Investors seemed to latch on to even minor blemishes. General Electric’s profit margin from industrial operations improved by 0.66 percent, barely missing its target of 0.7 percent. Still, shares are down 11 percent since it reported results Jan. 17.

‘‘The market is punishing those that don’t deliver,’’ said Krosby.

On the other hand, companies that have posted strong results and outlooks for 2014 have been bid up.

The outlook for corporate profits and revenue for 2014 is strong, according to S&P Capital IQ. Revenue is expected to rise 4.5 percent for the year, compared to just 1.9 percent in 2013, and earnings are expected to rise 8.5 percent for the year, better than 2013’s 5.8 percent gain.

But investors are concerned that this isn’t quite enough to justify stocks’ high prices at a time when the Fed decision to slow its stimulus program is making cash a little less easy to come by. Less cash in the system means less cash for investors to buy stocks with.

‘‘The more you drain the stimulus, the better results you need to see,’’ Krosby said.