U.S. stocks continued to slide amid lackluster earnings for the third quarter yesterday as the S&P declined 8.3 points, or .47% to 1,746.36. Many investors continue to sit on the sidelines due to the abundance of headline and regulatory risk present today, and poor earnings reports have done little to assuage present fears. Yesterday the Dow was rocked when Caterpillar missed profit expectations and for a third time revised their full-year outlook resulting in a 6.2% decline in share price to $83.62, one of the largest declines the stock has seen since September 2011. Some of the volatility in the Dow was offset by Boeing’s 5.3% gain to $129.02 upon an increase in adjusted profits and an upward revision of their full-year outlook. The net result to the Dow was a drop in approximately 54 points to 15,413, a .35% drop.
Currently one third of the S&P listed companies have reported earnings thus far with roughly 66% topping profit expectations and 54% have beaten revenue expectations. While the number of those topping profit expectations is slightly higher than the historical average, the disparity between the revenue and profit percentages highlights some concern for investors who feel companies are not focused on revenue and market growth.
While this may scare off some, it is important to remember that this is not new behavior for where we are at in our current period of economic recovery. Many companies continue to take capitalize on this low interest rate environment to seek out new acquisitions and technologies, as well as trimming their gorged budgets and variable costs which can often account for the disparity between rising profits and flat or declining revenue.