November 22, 2017
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Quote of the week
“You say you want a real solution/Well, you know/We’d all love to see the plan.”– from The Beatles’ “White Album,” released November 22, 1968
The Lead Story: Equity investors celebrate even before they sample the stuffing
As the Thanksgiving holiday approached, U.S. equities climbed in light trading. Buoyed by technology stocks, the S&P 500 Index notched a fresh record high on November 21 before treading water the following day. Year to date, the index has returned a stellar 18.2%. Europe’s STOXX 600 Index retreated on November 22 after posting back-to-back gains.
While this environment has been friendly to shareholders, it’s been less kind to U.S. companies that have failed to meet earnings expectations. According to Factset, S&P 500 companies that reported below-forecast third-quarter earnings saw their shares fall an average of 3.5% in the two days before and two days after releasing earnings reports. That’s harsher than the 2.4% penalty that companies have endured over the past five years for missing forecasts. On the other hand, companies that topped forecasts received barely any boost at all. Their reward, in many cases, has been simply maintaining a higher-than-normal valuation.