‘Better Than Feared’ Is New Analyst Phrase to Describe Earnings

(Bloomberg) -- In an earnings season marred by a government shutdown and ominous signals from China’s economy, financial estimates have taken a back seat to a more visceral metric -- fear.

A common praise from sell-side analysts this quarter has been that results were “better than feared” for everyone from Advanced Micro Devices to 3M and Schlumberger. The trend may be best exemplified by Apple, which rose more than 5 percent Wednesday after a quarterly revenue forecast that fell almost $2 billion short of analyst estimates at the midpoint.

“It’s not the news that matters, it’s the reaction to the news,” said Michael Antonelli, an equity sales trader at Robert W. Baird & Co., in an interview. “This is all about what the market had priced in, and it turns out it isn’t as bad as expected.”

Stocks have stormed back from a December meltdown but the S&P 500 is still trading 9 percent below September’s record high. With more heavyweight tech earnings on the horizon, bullish investors will need the perceived bar for success to stay low or rely on companies to rally the traditional way -- by blowing estimates out of the water.

Analysts are optimistic about user growth at Facebook, while Microsoft’s results come amid signals that cloud spending may be shrinking. Both companies report after the close, followed by Amazon.com on Thursday.

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