With over a third of the S&P 500's market cap having reported, results have been mixed. Aggregate earnings are tracking ahead of expectations but this miracle is driven almost entirely by financials (which account for 85% of the beat) as lower expenses and higher reserve bleeds offset contracting NIMs (combined with a lack of MtM) to enable a total manufacturing of what S&P 500 EPS is. As Morgan Stanley's Adam Parker notes, the quality of the beats has been low, with companies benefiting from a mix of lower operating costs and lower taxes. Revenues are missing estimates (hurt by a stronger USD and macro weakness) and Tech has been particularly weak. More importantly, for all the hope-driven, recovery-is-around-the-corner, 'fiscal-cliff'-won't-happen believers, the majority of forward guidance has been negative resulting in the highest negative-to-positive ratio since 1Q07 but this is not priced in as top-down 4Q12 estimates have hardly budged.
Earnings are slightly ahead of expectations - thanks almost entirely to financials! Do you tust that data?
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Negative guidance is dominating positive outlook changes...
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yet top-down EPS estimates remain unchanged (to slightly higher - again thanks to financials)
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as for the 24th week in a row, net earnings revisions are negative...
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and where are the world's EPS estimates being cut the most? (i.e. where was hope highest?)...
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So you still believe in miracles?
Charts: Morgan Stanley and @Not_Jim_Cramer