The Dow Jones Industrial Average (^DJI -0.98%) and the broader S&P 500 (^GSPC -0.46%) were essentially unchanged on the day, up 0.02% and 0.04%, respectively. Let's look at what happened on a fairly quiet day in the markets.
According to a Goldman Sachs (GS -0.71%) note to clients published over the weekend, fully 18 of the 20 companies that provided guidance for the fourth quarter in the current earnings season have lowered guidance -- a 90% base rate. As Goldman's chief U.S. equity strategist David Kostin put it: "Although guidance tends to be downbeat, this is especially negative."
By week's end, we'll have a much better sense of the strength of this trend, as more than half of the companies in the S&P 500 will have reported earnings. Kostin is pretty bearish, at least with regard to the near term: His year-end forecast for the index is 1,250, which represents a nearly 13% decline relative to today's closing price.
That seems to me a plausible scenario, but nothing more than that; I'm also pretty bearish, but one of the tacit truths of the securities industry is that making forecasts over a two-month (or even two-year) period is an exercise in futility. Let's take a lesson in humility by reviewing the words of Yale professor Irving Fisher, who wrote on this day in 1929: "[T]he breaks of the past few days have driven stocks down to hard rock. I believe that we will have a ragged market for a few weeks and then the beginning of a mild bull movement that will gain momentum next year." The Dow then lost nearly a quarter of its value before the year was out and went on to lose another third of its value in 1930.
Although it is not particularly representative of the technology sector, let alone the broader economy, Facebook's (META -10.56%) second earnings report since going public will garner enormous attention tomorrow. Here also, I'm pretty bearish: Without having looked at the specifics, Facebook appears to be increasingly desperate to monetize its user base, and it has proved less than forthright when it comes to treating bad news. Technology analyst Evan Niu has looked at the specifics; if you want to get his assessment on whether the shares are a buy now, click here to order his premium report and you'll receive a year's worth of his updates.
