Why stock reactions often don't reflect earnings: Strategist

As earnings season unfolds, companies like Uber (UBER) have taken center stage with their financial reports. Interactive Brokers Chief Strategist Steve Sosnick joins Market Domination to provide insights on the day's trading takeaways.

Addressing Uber's share price decline despite beating earnings, Sosnick suggests that the impact on the markets will be "Uber-specific." However, he notes a broader trend where companies posting earnings beats have not seen their stock prices reflect that performance. Sosnick explains that "people are looking through them [earnings] to see how they're managing their businesses."

"We've gotten sort of spoiled by the Nvidias (NVDA) of the world, the beat and raise, then beat again and then raise again," Sosnick told Yahoo Finance, adding: "That's not necessarily normal, and so I think what happens is the markets do tend to punish disappointment more than they reward success on earnings. You're supposed to beat on earnings, you're supposed to do well."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith

Video Transcript

Fox mix today as the market does close here here with us to talk about the takeaways of the trading day is Steve Sosnick, chief strategist at Interactive Brokers.Steve, it is always good to see you.Great to see you, Josh.So So, Steve, it was interesting.Julie was mentioned.I mean, obviously, you know, major averages were mixed today.It was It was, I thought, interesting to look at uber today.Big name loved on this.I mean, more than 90% of analysts say you should buy this, Steve, and it got wrecked today.I was just Do you think there's any is any kind of canary in a coal mine?Is that suggesting anything bigger and broader to you, Steve or No, that's uber specific I. I think in this case it's uber specific because I was travelling recently and I got all kinds of emails that, you know, I was getting all kinds of discounts to take uber for for Cheaper and I in hindsight, that was a 2020 signal to short the stock.But I didn't do it.Um, but, uh, you know, I think what's going on now is actually the broader picture here.Josh is.We've had a number of stocks beat on their EPS numbers, but yet get whacked anyway, I think this is becoming The more important trend is when you have a situation where 75 80% of the stocks in the major indices are beating their EPS estimates, and yet they go down anyway because of some other factor.It's telling me that that managements are getting very good at managing their analysts, but but it's not.But But now people are looking through them to see how the man their business think Meta, which got whacked.They beat on estimates.Think yesterday we had palent here and Disney.They beat their EPS and then they got hit anyway, uber today.So this is becoming a thing where people are looking past.They sort of, you know, it's sort of a necessary but not sufficient, uh, situation for you to beat on EPS.It's interesting, too, you know, that people are sort of looking through not necessarily buying the company line, if you will, but at the same time are we seeing reactions in a lot of cases, I mean some of the moves that we are seeing are quite extraordinary in terms of the size, yes, but I mean it.It's always been a little asymmetric, right?We we typically don't see a lot of rallies that that match the disappointments.I mean, the problem is we've kind of gotten used to them.You know, we're expecting arm.Let their last quarter of the world where they have 50%.And, you know, we've gotten sort of spoiled by, Let's say, the NVIDIA of the world that beat and raise and then beat again and then raise again and that that's not necessarily normal.And so I think what happens is the markets do.The markets do tend to punish disappointment more than they reward success on earnings you're supposed to beat on earnings you're supposed to do well, you mentioned Steve Uh, NVIDIA.Is that the next catalyst for the market?We should be looking to potentially Yes, And the reason the reason why is number one that has been such the poster child for for the rally.You know, it's it's it's the A I, darling, and this is certainly an A I inspired rally.What worries me a little bit is what Mark Zuckerberg said in his conference call.Um, basically I. I said it was saying the quiet part out loud where he was saying, Well, we're spending these billions of dollars on a I but it may be years until we actually see the see the results of that.Well, if Mark Zuckerberg is saying that regarding Meta, which is probably one of the best position companies to benefit from a I, well, what chance do the rest of the companies have?And so does that mean not that not that the trade is over, let's say, but does it mean that this part of the cycle is over?And I think about the Internet in 99 and 2000, which was which proved to be everything that everybody thought it would be and then some.But it took a while longer than people anticipated.For the Internet to be the the productive.The, you know, have the revolutionised the productivity that people thought it would.And so I wonder.That's my concern is, does NVIDIA.If and when does NVIDIA start to Peter out?Not necessarily go down, but just sort of stop the the the meteoric rise