S & P 500 -listed firms are being less rewarded than normal by investors for beating Wall Street’s earnings expectations this season. The average S & P 500 company that has exceeded forecasts has slipped about 0.2% in the day after reporting, according to a data anlaysis from Charles Schwab. In an average quarter since 2017, companies in this position have gained around 0.6%. But that’s not a reason for investors to fear, said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research. Investors appear to be taking profits on some high fliers in the market after their earnings reports — even if they come in ahead of where the Street anticipated, he said. “It’s almost like a take-a-breath moment,” Gordon told CNBC Pro. Post-report gains have historically pared back the further one gets into a business cycle, Gordon said. Plus, expectations were especially high heading into this season of corporate earnings releases, he said. Because overall earnings breath remains strong, traders don’t need to worry that this could proceed a larger drawdown, Gordon said. Of the nearly 16% of S & P 500 companies that have released earnings so far, more than 87% have exceeded expectations, according to FactSet data as of Wednesday afternoon. “This is just more consistent with what history shows us,” Gordon said. “But it’s not, in any ways, an end to the to the bull.” Despite attention-grabbing drawdowns in sectors like semiconductors, underlying market breath remains intact, Gordon said. Investors should view the current market conditions as “highly rotational” rather than “correctional,” he said. Looking ahead, Gordon said he’ll be closely monitoring reports from consumer-facing companies. He will be looking for insight into how shoppers are faring with reaccelerating energy prices amid the resurgence of fighting between the U.S. and Iran. The average U.S. gas price hit $4 per gallon for the first time in more than a month earlier this week, AAA said. On top of that, consumers are staring down an environment with potentially higher borrowing costs, he said. Fed funds futures are pricing in a more than 76% likelihood that the central bank hikes interest rates at its September policy gathering, according to CME’s Fed Watch tool . This trend will be put to the test next week, which is the busiest of this earnings season. More than one-third of the S & P 500 is slated to report, including well-known stocks like Amazon , Apple and Ford .
