At the End of the Day, It's Still About Earnings
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How did U.S. indexes perform and why did the Dow hit a seven-week winning streak?
I'm Charlie Turner in New York for The Wall Street Journal. the Nasdaq gaining nine, the S&P rising one point. Each index gained a fraction of a percent for the week, and the Dow is now on a seven-week winning streak. We're joined now by Wall Street Journal Markets reporter Corey Drebisch. Corey, first looking at Friday's action, the markets did stage a comeback, the Dow's fall notwithstanding.
Yes. Just in the last seven minutes of trading, the Dow went from having earlier been down about 280 points to suddenly ending just down 60 points and incredibly notching its seventh consecutive week of gains, as you mentioned.
Any particular reason for the last-minute rally?
It's hard to really prescribe anything.
What triggered the last-minute market rally on Friday's close?
Obviously, nothing changed fundamentally. It could just be some optimism heading into the weekend. Right.
Overall, where do things sit right now with financial markets? I mean, after a terrible last few months of 2018, January was a great month, but now it seems like uncertainty has resurfaced.
Yes, definitely in regards to global growth and the trade negotiations.
How are global growth concerns and trade talks shaping market uncertainty?
We've seen some uncertainty with how economies other than the U.S. I mean, heading into the end of last year, there was some worries about the U.S. economy growing. There's definitely this feeling that that's more on track with some data that we've seen earlier this year. We've talked about that in past podcasts. But earlier this week, we saw some iffy figures and some warnings from the European Union and the Bank of England. And that just sparked some more fears about what we could be seeing in terms of growth overseas. And then, of course, in terms of the trade talks, we know that on Thursday there was commentary that came out that President Trump and she will not be meeting before the March 1st deadline.
So that's not necessarily the most comforting for investors who want to see a deal met and they don't want to see 25 percent tariffs.
If we could pick a biggest worry right now, what would be the big worry? I mean, is the fact that earnings growth is expected to slow? Is it slowing overseas growth? Or is it concerns about what you've talked about, the U.S. and China possibly not reaching a trade deal? Because, you know, it seems to me investors have talked about slowing earnings as well.
Yes. Slowing earnings is probably a bigger concern than the trade deal leaves from investors I spoke with. Because when you really think about what matters to stocks and to stock prices, the belief is at the end of the day, earnings are what drives stock prices higher. And right now, in the last several weeks, we've really seen earnings figures that have come out for the fourth quarter. They're beating much lowered expectations. So they're coming in better than feared.
Why are analysts more worried about slowing earnings than the China trade deal?
So that's fine. Some of the stocks have gone up on that. But what really is worrisome is the guidance that a lot of these companies are giving hasn't been that great. And analysts have brought down expectations for first quarter earnings so that it looks like there could even be an earnings contraction in the first quarter. And investors I've spoken to are looking ahead and saying, you know what, not only could we see an earnings contraction in the first quarter, we could see problems in the second quarter. Earnings recession. And then suddenly you're in an earnings recession. And part of this is it's not that Things are so dire in the U.S. I mean, remember last year, this time, the comparables, it's so hard to beat because all these companies were coming out with huge boost things to the corporate tax cuts that we saw.
However, still an earnings recession is an earnings recession. And that has spooked some investors. Yeah.
What evidence points to a possible first-quarter earnings contraction or earnings recession?
In their guidance, their lowered guidance, have they cited these external events, trade worries and slowing growth? It seems to me they had to have done that.
Yeah, some have cited it, although some more skeptical investors and traders say they wonder if it's just being used as an excuse.
Really? It's just the good earnings news just can't continue.
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Chapters
6 chapters
1
How did U.S. indexes perform and why did the Dow hit a seven-week winning streak?
0:05–1:05
2
What triggered the last-minute market rally on Friday's close?
1:05–1:34
3
How are global growth concerns and trade talks shaping market uncertainty?
1:34–3:24
4
Why are analysts more worried about slowing earnings than the China trade deal?
3:24–4:23
5
What evidence points to a possible first-quarter earnings contraction or earnings recession?
4:23–5:07
6
Which economic reports and corporate earnings should investors watch next week?
5:07–6:11
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