According to strategists at Bank of America, companies in the S&P 500 index whose sales and earnings per share exceeded analysts' expectations outperformed the benchmark index by 2.4 percentage points the following day, the highest level since the fourth quarter of 2018.
A team led by Savita Subramanian said in a report to clients that positive earnings surprises are far exceeding the historical average outperformance of 1.5 percentage points.
On the other hand, the punishment for companies that missed earnings expectations is easing. These companies lagged the S&P 500 index by 2.2 percentage points, below the historical average of 2.4 percentage points.
"This suggests that with themes outside of artificial intelligence increasingly emerging, recent surprise moves driven by themes may no longer be as concentrated," she wrote.
Over one-third of S&P 500 index companies will report earnings this week, covering all 11 sectors.
According to Bank of America, more than 200 companies have reported earnings so far, with overall earnings exceeding expectations by 3%.
Bank of America data shows that the number of companies beating expectations for earnings per share, revenue, or both decreased from the previous quarter, but the number of companies citing soft demand decreased, and performance guidance also improved, reaching the best level since August 2023.