We’re finding out now why the stock market tanked in December


For the fourth quarter, which for many companies ends in December, 72 S&P 500 companies have issued earnings warnings, twice as many as have issued positive guidance, according to FactSet. Earnings growth rates have been revised lower by companies in all 11 S&P sectors.

It’s possible the S&P could have earnings growth of more than 15 percent for the fourth quarter, but that would be below the 25 percent notched for each of the previous three quarters, FactSet research said.

And analysts are now looking for single-digit earnings growth for the next three quarters of this year. While fourth-quarter 2018 earnings growth is projected to be 11.4 percent, the first-quarter projection is for 2.9 percent growth, then 3.7 percent in the second quarter and 4.3 percent in the third.

“In the last three months of 2018, markets were pricing in no earnings growth, and perhaps even negative growth, in 2019,” said Earnings Scout’s Nick Raich. “The good news is that markets likely overshot just how much 2019 EPS estimates were going to drop.”

Stocks have rebounded so far in 2019 as investors make a bet that the bad news yet to come this earnings season is priced in. We’ll just have to see.

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