It’s becoming the best earnings season in 9 years for stock reaction

However, investors might have been just ignoring the bad news because the growth estimates in 2019 are pointing to a big deceleration.

Wall Street analysts are slashing their estimates for the next quarter at a record pace. According to FactSet, the first-quarter bottom-up earnings per share estimate has dropped by 4.1 percent during January, which is a larger decline than the 5-, 10- and 15-year averages.

“If I’m a bull, one of my big concerns is that where the earnings growth is going to come from and what’s going to stop this decline. What’s going to be a positive catalyst? I don’t think we have one at this moment,” Essaye said.

EBIT margin consensus estimates for 2019 have fallen by 60 basis points since October, the most significant downward revision since the financial crisis, according to Morgan Stanley. The bank also pointed out the ratio of negative to positive guidance for the first quarter is the highest since 2016, when we last had an earnings recession.

“Earnings growth is rolling over even faster than we thought it would with revisions breadth falling in just about every sector. Quite frankly, we are surprised at the lack of acknowledgement of this deterioration by most analysts and commentators. … We think objectivity on quarterly earnings reports is being swayed by the price reaction in the stocks,” Morgan Stanley chief U.S. equity strategist Mike Wilson said in a note on Monday.

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