Investors greet strong earnings with a collective shrug

While the FTSE 100 clings on to gains, Wall Street is heading lower, as the support of big-ticket earnings falls away, leaving the market vulnerable on the final day of the week.

• Wall Street sheds ground in early move
• Quiet market regime belies potential risks
• Exxon another sufferer of the ‘so what now?’ theme

Now that the big earnings are mostly out of the way for the week indices have found it harder to hold their ground, slipping lower for the most part. It has been a week of drift for the headline indices, a recognition of the fact that, while earnings season is coming in as one of the best on record, investors have still been unable to muster up the necessary optimism to drive to new highs. Instead dither has been the theme, making it seem like the wind-up toy of momentum is running down to a stop, which in its turn risks the start of a correction of some size and magnitude. The low VIX reading continues to point to a benign risk environment, but when stocks fail to rally hard in one of the best earnings periods of recent years it is a sign that something is not right in the world. 

Exxon Mobil’s results yet another demonstration of how stocks refuse to bounce despite the relentless beat on estimates this time around. Ennui seems to have set in across US and UK markets, and while we scramble to find a concrete reason why stocks refuse to respond to positive news the truth is the same across all names, i.e. the good news is fine and dandy, but doesn’t really point to why it makes sense to keep chasing names after the rallies of the past few months. This ebbing of momentum is the big problem for markets, although positive seasonality could help offset any major declines, even as ‘sell in May’ crowd works itself up for another go at reviving this moribund idea.