Investors Want More Than “Par” Earnings

Halfway through fourth-quarter earnings season, U.S. stocks are coming off their worst January in years, sending the message to Corporate America that par for the course isn’t good enough after the run-up in stock prices over the past year.

The Dow Jones Industrial Average DJIA -0.94% ended the past week down 1.9%, capping a monthly decline of more than 5%, its worst January since 2009, when it fell 8.8%. Likewise, the S&P 500 Index SPX -0.65% finished the month down 3.6%, its worst January since 2010, when it fell 3.7%. Finally, the Nasdaq Composite Index COMP -0.47% finished down 1.7% for the month for its worst January since 2010, when it dropped 5.4%.

Declining emerging-markets currencies such as the Turkish lira and the South African rand, coupled with a contraction in Chinese manufacturing, weighed heavily on markets as the Federal Reserve pushed forward with its tapering of monthly asset purchases this past week. All that uncertainty, along with the S&P 500’s 30% gain in 2013, has raised investor expectations about quarterly earnings results.

“Investors are like children: If you tell them you’re bringing home a puppy, you better have a puppy when you get home,” said Nicholas Colas, chief market strategist at ConvergEx.

MarketWatch

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