Q4 Earnings Thus Far A Reality Check For The Trump Rally?

Shares of several big ticket firms fell following their earnings reports this month. While stocks had been rallying on hopes of President Donald Trump’s potential policies, including possible corporate tax reform and manufacturing boost, the Trump rally could now be nothing but a cracked pipe dream.

The initial boost from Trump has not manifested in sustained investor confidence. Wall Street appears not to be significantly impressed by quarterly results, or the stocks' potentials to continue higher. Notably, the market has been flat since mid-December.

This Week's Prints Thus Far

Tuesday’s notable laggards were Dow components Verizon Communications Inc. VZ and Johnson & Johnson JNJ. Further, tepid prints from Lockheed Martin Corporation LMT and Polaris Industries Inc. PII tempered investor enthusiasm.

Verizon reported lower-than-expected earnings, while Johnson & Johnson dished out a mixed report: an EPS beat of $0.02 but a slight miss for revenues. Lockheed Martin, though, posted better-than-expected results for its fourth quarter, but issued a weak profit outlook for 2017.

Monday, Halliburton Company HAL and McDonald's Corporation MCD faced investors ire after their quarterly numbers were released. Interestingly, McDonald’s retreated despite reporting a quarterly beat, possibly on sluggish U.S. sales.

Financials

On the financial front, most of the issues, including Morgan Stanley MS, KeyCorp KEY and BB&T Corporation BBT, were in the red after their earnings numbers. Among others, Comerica Incorporated CMA and insurer UnitedHealth Group Inc UNH, transportation company J B Hunt Transport Services Inc JBHT also traded lower after earnings.

This Week Continues Last Week's Trend

Last week, shares of diversified conglomerate General Electric Company GE saw its shares drop after its revenue fell short of the Street view. Oilfield services major Schlumberger Limited SLB declined after the company's earnings took a back seat to comments from CEO who sees the current business environment as being "unsustainable for us.”

These bearish movements trigger an all-important question of whether the Trump stock market rally has gone too far, too fast. The issue boils down to this: Investors may have jumped onto the bullish bandwagon without the potential policies of Trump coming to fruition. Also, investors have ignored negatives, like a possible trade war, and the hiccups in actual implementation of those policies.

It's Not Over

As such, volatility will persist until the market gets a clear idea over how these policies might pan out. In this scenario, only a flawless earnings report could save the stock from investor backlash.

At last check, the S&P 500 index was up 0.76 percent to 2,282.51 and shares of SPDR S&P 500 ETF Trust SPY were up slightly by 0.76 percent to $227.86.