Dow Takes a Dip as Earnings Season Heats Up, S&P 500 Holds Steady
On Tuesday, The Dow slipped back 0.1%, while the S&P 500 eked out a gain of the same rate, and the Nasdaq added an additional 0.2%. This round of the financial reporting season met with a mixed reaction in the market.
The Dow has a significant component. UnitedHealth (UNH, Financial) saw its shares drop by 9% after the company knocked down its full-year earnings forecast and dampened outlooks for its performance. On the other hand, Bank of America(BAC, Financial) rose by 2% after it posted earnings above Wall Street's estimate.
This earnings season is crucial. Of the S&P 500 firms, about 40 have released Q3 reports, at least in the United States. Based on data from FactSet, 80% of these companies have topped analyst forecasts. This trend is supported by certain overall stability in corporate America despite persistent economic fluctuations.
Their reaction follows the S&P 500 and the Dow, posting robust results that saw the latter hit record gains and join the 43,000 club for the first time to close. These rising markets have led some analysts to question the long-term viability of the observed current levels of P/E multiples.
Scott Chronert, Citi's U.S. equity strategist, commented on CNBC's Closing Bell that the S&P 500 appears "at least fairly, if not slightly, overvalued."However, he suggested market will likely sustain the market if the incoming information collectively boosts investors' investments. Such cautious optimism is good enough because the factors at work as Wall Street manages another earning season amidst more complexities involving the world economy cannot be underestimated.
This article first appeared on GuruFocus.