It seems the global markets won’t have a respite from negative sentiment. Friday’s sharp fall on US bourses highlights the fact that the markets are not yet out of the woods and there could be more pain in the offing as hopes diminish on positive surprises from earnings.
Holding tight: A file picture of trading at a stock brokerage firm in Mumbai. Markets in India are in a state of wait and watch as technology bellwether Infosys kicks off the earnings season this week.
India continues to grapple with soaring inflation, which now stands at 7.41%, while the US is dogged by disappointing corporate earnings.
The decline in US markets on Friday was triggered by General Electric Co., which tanked 12.8% to $32.05 a share, its worst ever fall since the 1987 crash, after it reported a 6% drop in profits and with revenue guidance for the year suggesting marginal or no growth, against an expectation of a 10% expansion — a good enough signal of what lies ahead in the US corporate world.
Moreover, the story so far in the US has not been good. The earnings season, which began with below-expectation results from aluminium producer Alcoa Inc., has so far witnessed all negative surprises including from United Parcel Service Inc. — the world’s largest package delivery company — Advanced Micro Devices, etc. They have all reported earnings below expectations and also painted a gloomy picture of revenue outlook.
Though this was just the beginning and this week is very crucial from the earnings point of view, the mood on markets globally is sombre: any negative news related to earnings might aggravate the fall, while the positive surprises would be viewed with suspicion. Clearly, unless a good number of companies provide positive earnings and revenue forecast, the earnings will not provide any positive trigger to the markets.
India, which is yet to start the earnings season in a big way, will have its first major test on Tuesday, when information technology bellwether Infosys Technologies Ltd reports its earnings.