Instanz : Die Aufwärtsbewegung an den US-Börsen
"Forget this market comeback: The real test happens two weeks from now"
Lower trading volume in the holiday season could be a reason for the big moves in the market as small orders make bigger impact. While it's hard to put a concrete finger on the market driver, the ultimate scorecard will come down to companies' 2019 guidance, which is poised to give the market some direction.
Earnings season begins Jan. 14, when the big Wall Street banks start reporting.
"It's difficult to make any real concrete assumptions both down and up. There's not a lot of news coming around with regards to the markets. For us, we are really going to pay attention to what 2019 outlooks mean for consensus estimates," said Jeremy Bryan, portfolio manager at Gradient Investments.
Wall Street analysts are already slashing their earnings estimates for 2019 to just single-digit growth, a big slowdown from the record 21 percent earnings growth expected when 2018 is all said and done, according to FactSet.
"Expectations have come down pretty dramatically at this point. With that, you have got a pretty low bar to hop over. The guidance companies give is going to be around what the tariffs are going to be and what the impact of Washington is going to be," DeSanctis said.
The market may already be pricing in the lower expectations as evidenced by a severe drop in valuation. The forward price-earnings ratio for the S&P 500 fell to 14.62 on Friday, the lowest level since October 2014.
"I don't think 2019 outlooks are going to charge the market straight up. I don't think they are going to be significant above where the sell side is right now. Valuations have taken a pretty significant hit recently, so is that already priced in ? that's what will be the big determinant," Bryan added.
"Corporate Profit Crunch Looms as Stocks Slide"
A danger is lurking as the stock market dives: Earnings expectations are falling, too.
In December, analysts cut their earnings forecasts for 2019 on more than half the companies in the S&P 500, according to FactSet, the first time that had happened in two years.
For now, analysts still expect profits to keep growing in the coming year, but at a slower pace. They expect earnings for S&P 500 companies to grow 7.8% in 2019, down from their forecast of 10.1% at the end of September, according to FactSet.
That is a big climb down from the estimated 22% earnings growth rate in 2018, when corporate results were boosted by tax changes and a strong economy.