Something that I like to watch for as we head into the thick of earnings season is the market's reaction to quarterly earnings reports. Although one day does not make a trend, I went ahead & put together some stats on the market's reaction to the most recent batch of earnings reports. I chose yesterday because the US equity markets were essentially flat, with the $SPX virtually flat at a close of -0.15%, the $NDX closing up +0.42%, S&P Mid-Cap index a flat +0.01%, S&P Small-Cap index -0.24% & the Dow Jones Total Stock Market Index closing at -0.11%. That's about as flat an overall market close as you get. Therefore, all other things being equal, the reaction to individual companies that reported after the bell on Monday or before the open yesterday shouldn't have been influenced by money flows in or out of the broad market tracking instruments (e.g. - S&P 500 index funds, QQQ, IWM, etc...), as is most often the case.
With that being said, we had a total of 76 companies report after the close on Monday & before the open yesterday. Of those 76 companies, a very impressive 60 of them, or 79%, either met or beat expectations (with the vast majority beating the consensus). However, over half, or 41 of those 76 companies (54%) closed the day in the red which is an indication of institutional distribution, i.e.- selling into good news.
Again, one day does not make a trend but this is something that I will be watching for going forward as it's the market's reaction to news, good or bad, that is most important, not the headlines, earnings results, or forward guidance that matters as stock prices are driven by supply & demand, not to mention the fact that good (or bad) news is most often priced into a stock well in advance of the headlines.