Right now the US market is taking everything being thrown at it, says Ryan Detrick, Chief Technical Strategist, Schaeffers Investment Research. US equity benchmarks have been resilient to weak earnings from Microsoft and Google, and the bankruptcy filing by Detroit city.
In an interview to CNBC-TV18, Detrick says the bar has been set too low for this earnings season. That is why most companies have So most companies have managed to beat analyst estimates. On the flip side, if a company were to report negative news, investors would dump the stock. Overall, Detrick is positive on US equities.
Below is the verbatim transcript of Ryan Detrick’s interview on CNBC-TV18
Q: Before we get to the market since we were just headlining what happened in Detroit, just want to understand what really is the sentiment impact from such a development in the United States (US)?
A: Clearly, it is concerning. The US has started to grow and expand, Detroit never could quite fix it. At the same time you look at the US auto industry Ford and General Motors (GM) and those are clearly very closely tied to Detroit, atleast the whole state of Michigan and they are down a little bit today, but they have had a great run. So, it is concerning sure. But your bigger picture, I was going to talk about it in a second, those headlines were scary, the fact Microsoft and Google also had kind of weakish earnings. S&P is flat on the day, DAX is underperforming, there are scary headlines out of Detroit, but the market is what we are talking about here seems to be taking things in the stride fortunately.
Q: To get to the market action, as you said disappointing earnings from Google and Microsoft and the street after the highs yesterday today is infact taking a breather, but just how much of an impact could this have on earnings season. What really are your expectations from the earnings season going ahead?
A: Obviously, today it is only tech (not sure), but I don’t think it is quite from the bigger picture, quite as bigger deal. Look at General Electric (GE), I could just say they have some positive things to say and they are having a really good day between four and five percent. So, this earnings season what we are seeing early is we know the bar was set rather low, everyone seems to know that. In the first two weeks or so we have had a good run in the overall stock market as most companies have beat the earnings, but the flip side is if you report any negative news then you can be pounded just like Microsoft is today down over 10 percent. Some other companies we have seen that have disappointed.
So you would better beat the lower bar. But overall we still were positive on the US equities here. Once again small caps are holding up very well today and that in our opinion those are more aggressive by nature, are also more domestic by nature, US based. So that is a good sign. The rally is overextended, but look in one or two months we still think a potential for upward price action is very strong.