Investors Are Punishing the Stocks of Companies that Miss Earnings Expectations

Core Insights - Investors have reacted negatively to disappointing earnings reports from companies like Netflix and Chipotle, leading to significant declines in their stock prices [1][2] - The overall performance of S&P 500 companies has been positive, but the rewards for beating earnings expectations have been minimal, while penalties for missing expectations have been severe [2][4] Earnings Performance - Companies that missed earnings expectations experienced an average stock decline of nearly 5% around their earnings release, which is worse than the five-year average decline of -2.6% [3][8] - Conversely, companies that beat earnings expectations saw an average stock increase of only 0.1%, below the five-year average increase of 0.9% [3][5] Market Sentiment - The current earnings season has shown a trend where traders are more pessimistic, despite a record number of positive earnings surprises among S&P 500 companies [4][5] - Over 64% of S&P 500 companies that reported earnings exceeded consensus EPS estimates by at least one standard deviation, compared to a historical average of 49% over the past 25 years [5][8] Macro Environment - The earnings season is taking place against a backdrop of macroeconomic volatility, including renewed trade policy uncertainty and concerns regarding bank lending [9]