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After getting off to a blistering start, fourth-quarter earnings season has come back to Earth in the last couple weeks.
Weaker-than-expected reports from Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB) and Microsoft (NASDAQ: MSFT) – among others – have basically brought the earnings scorecard back to even par halfway through this earnings season.
Financials got this earnings season off to a fast start, helping stocks rise 3.5% in the last three weeks of January. The market has essentially leveled off since – in part because recent earnings reports have been less inspiring.
Nearly a month into fourth-quarter earnings season, roughly 70% of companies have beaten their own estimates. Seventy percent is about the average for the last five years of earnings seasons.
With a few weeks still to go this earnings season, momentum is going in the wrong direction. This morning BP (NYSE: BP) became the latest big-name company to report disappointing earnings.
New government fines stemming from the British oil company’s 2010 Deepwater Horizon oil spill weighed on BP’s profits, driving its earnings down 72% from the previous year.
An average earnings season isn’t likely to do much for stocks other than maintain the status quo. But the status quo has been pretty good of late.
Financial markets have been doing just fine despite high unemployment numbers, ongoing financial turmoil in Europe, and threats of fiscal cliffs and debt ceilings. More than fine, actually: the S&P 500 is up more than 11% in the last year.
As long as earnings don’t completely flop, that’s likely to continue. For now, it seems, average earnings are good enough to keep investors buying.