Whispers and Shouts

While those of us here at Atlas Indicators maintain that the daily gyrations of the equity markets can rarely be ascribed to any single cause, we also recognize that they are hard to ignore.  One driver of such volatility surfaces often enough that we can attach some of the blame to it: the quarterly earnings reports.  Most companies making up the S&P 500* operate on a fiscal year; they have their quarters terminate at the end of March, June, September, and December.  Since one compelling reason to own a stock is the belief that the company’s management will make better use of your invested dollar than you can, these quarterly earnings reports are eagerly awaited.  They can validate the faith placed in the management’s ability to produce, market, and deliver a product that will be sought out, or they may show disappointing results.  An army of analysts parse each company’s commentary, trying to guess the next quarter’s results in advance.  Much like sardines, analysts tend to gather together in tight schools of thought, each fearing should his projection both fall too far outside the norm and be horribly wrong, his resume will need freshening fast.  So we, the investors, get a consensus view of each company’s progress which is boldly announced in print and on TV, suggesting what the earnings will be when announced.  There is also a “whisper” number that is occasionally, but only briefly, discussed, consisting of rumors about various analysts’ true opinions should they be seen as falling too far out of line from that of his comrades.  The first two weeks or so after each quarter ends often sees subdued trading, disturbed only if such whispered numbers surface.  When the actual results are released, all the shouting you see in video clips of the exchange begins.  The action really gets going as each stock’s price adjusts to the published earnings relative to expectations, both overt and covert.  Those months that fall after the prior quarter’s end contain both the whispers and the shouts, often leading to the confusion and volatility at which we all wonder.
*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and cannot be invested into directly.