Has the S&P500 earnings season kicked off a new rally?

We are moving towards the definitive end of the earnings season, with the companies in the S&P500 sharing results that are often outside of expectations, a characteristic that has often caused sudden movements, leaving clear volumetric gaps on the price charts of many companies making up the index.
Faced with an almost complete view of the performance of US companies, is it possible to say that the worst for the markets is over? Here is a brief summary of the quarterly results for October-November 2023.
Focus on the quarterly reports of companies on the S&P 500 The quarterly reporting season is a crucial moment that resembles a sort of test regarding the prospects anticipated by experts in previous periods.
This moment is characterized by the possibility of further increases in expectations or, on the contrary, by possible downsizing of forecasts.
Focusing specifically on the earnings of companies included in the S&P500 stock index, we note that almost 400 companies have already communicated their results, paving the way for an in-depth reflection on the general trend.
As is traditionally the case, the vast majority of companies beat analysts' expectations, with nearly 70% of them reporting higher revenues than the previous quarter.
What's even more interesting is that along with revenues, the operating margins of these companies have also increased.
This represents a clear signal of more efficient and resilient company management, despite the economic and financial difficulties that have characterized recent times.
These positive data emerge particularly clearly in the large capitalization companies present in the index, among which Meta Platforms and Microsoft Corp.
(MSFT) stand out, which rank among the most "surprising" companies from a fundamental point of view during this season of the quarterly reports.
The strength of the technological component is therefore confirmed, as one might expect.
However, what may really be surprising is what happens among small-cap companies, often referred to as "small caps." In particular, in the travel and leisure sector of companies, there have been notable increases in core values.
This result comes as a surprise, especially in light of the growing financial and economic difficulties widely discussed in recent months.
Does it make sense to expect the S&P500 to grow? Unfortunately, reading quarterly reports to understand the future and technical performance of stock prices is not typically considered a very wise or, at least, exhaustive strategy.
Fundamental data represents the only tool available to a retail investor to evaluate the health of a company, but they can often diverge, especially in the short term, from the technical performance of the stock.
The variables at play, especially at this time, are many and can change rapidly.
At the same time, statistically, for several reasons, it is not that unusual to see most US companies beat expectations during the reporting season.
It should be specified, however, that the sharing of the latest quarterly reports seems to have led to an overall recovery by the price of the S&P 500 index, which grew by almost 7% compared to the October lows.

Author: Hermes A.I.

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