The first quarter ends today, and in just a few weeks companies will begin announcing their financial results.
Expectations have been tempered by the negative guidance telegraphed by these companies.
"For Q1 2014, 93 companies in the S&P 500 have issued negative EPS guidance and 18 companies have issued positive EPS guidance," noted FactSet's John Butters. "If these are the final numbers, it will mark the second highest number of companies issuing negative EPS guidance and the third lowest number of companies issuing positive EPS guidance for a quarter since FactSet began tracking the data in 2006."
It's important, however, to consider the magnitude of the negatively revised expectations.
"Although the number of companies that have issued negative EPS guidance is high, the amount by which these have companies have lowered expectations has been below average," added Butters. "For the 111 companies in the S&P 500 that have issued EPS guidance for the third quarter, the EPS guidance has been 6.7% below the mean EPS estimate on average. This percentage decline is smaller than the trailing 5-year average of -10.8%."
It's hard to draw any conclusions from this except that managements have had an increasing tendency to be more pessimistic than optimistic. And for some reason, the stock market has been climbing with this trend.