Inside Markets — Buyer Fatigue

Q2 earnings season is off to a strong start, particularly for airlines and banks that see solid growth after a peak in macro/policy uncertainty.  Aggregate overnight results came in better than expected, but the recent rally has resulted in higher multiples and some buyer fatigue.  Overnight results from AXP, MMM and NFLX all beat with increased guidance, but shares come under pressure given a higher buyside bar.  If the market is a voting machine in the short-run and weighing machine in the long run, earnings season provides the scale.  The volume of earnings reports ramps up next week and the market reaction to strong results could change, but the early reaction has been to allow companies to grow into their multiple.  Of course, monetary easing tends to drive multiple expansion and valuation concerns evaporate in an instant – especially when consumer cash balances are at record levels.