Markets Cautious Over First Quarter Negative Estimate Revisions - Economic Highlights

Total earnings for these 88 companies are up +1.7%, with 63.6% coming ahead of consensus earnings expectations. Total revenues are up +4% and 42% are beating top-line expectations. The composite growth rate for Q1, where we combine the results for the 88 companies that have reported with the 412 still to come, is for decline of -1.2% on +2.4% higher revenues.

The results thus far are weaker than what we have been seeing in recent quarters, but not by a lot. Earnings growth is weak and fewer companies are coming out with positive revenue surprises relative to other recent quarters. The Q1 weakness is likely no surprise for the market, as expectations were quite low to begin.

But while investors may have ‘written off' Q1 as the low point for earnings this year, they are holding out for better times ahead on the earnings front. The hope has been that the improving domestic economic scene and stabilization in Europe will start showing up in guidance from management teams as well. But we are not seeing that, with managements continuing to provide sub-par outlook for the coming quarter(s). In other words, management teams are dishing out what they have been doing for more than a year now.

What this means for the market is that we will continue to see the same negative estimate revisions trend play out in the coming weeks and months that we have been seeing for almost two years now. The market wasn't overly concerned about that trend back then, but seems to be a bit cautious this time around. With the Fed expected to be less of a prop going forward, the market needs a reassuring earnings backdrop to push stocks higher. But they aren't getting that, at least not.