It's been a critical week for markets with key financial announcements as earnings season winds down alongside new economic data. For us at Cornerstone, broader macroeconomic data is top of mind for three key reasons.
First, upcoming reports on gross domestic product and durable goods are set to shape sentiment, especially given the recent concerns over economic growth.
Next, the upcoming core personal consumption expenditures report (the Federal Reserve’s preferred measure) will significantly factor into discussions about Fed policy and whether odds for a near-term rate cut might shift:
And third, due to the recent growth concerns, we’re interested in the potential reintroduction of a more dovish stance by the Fed, which could bring the “Fed put” back into play:
Interestingly, the recent growth concerns have seemingly affected long-term interest rates, with significant downward pressure on the 10-year yield:
The key for us is that after a spate of earnings and early-year macro data releases, there are still many key data drops right around the corner. We believe this has warranted cautionary market action.
Earnings Season Recap
With February and earnings season now complete, let’s see where we stand so far. As of this writing, 94% of S&P 500* companies have reported earnings. Of them, 78% have beaten earnings estimates:
While 62% have beaten revenue estimates:
The earnings beat rate is slightly above the 10-year average of 74%, while the revenue beat rate is just below the 10-year average of 64%.
Most importantly, the year-over-year earnings growth rate is 18.5%, which is extraordinary. That growth rate is 5.7% above original estimates.
From a sector perspective, actual earnings growth is beating predictions in seven of the 11 sectors, with financials and consumer discretionary leading the pack:
But as long-time readers know, even when you have strong fundamental earnings results, it doesn’t always immediately drive share prices higher. Often, we see a lull around the end of a strong earnings season.
This edition seems similar. All major indices have shown weakness over the last month:
It’s also happened in a handful of sectors:
Some interesting points:
- Health care is leading the pack in 2025 even though it’s one of the weakest sectors fundamentally.
- Consumer discretionary stocks have struggled all year, especially over the last month, despite posting one of the biggest earnings growth beats.
- After starting out strong, technology has struggled.
Since Feb. 1, performance has been mediocre at best.
The action over the first two months of the year has created somewhat of a push-and-pull underneath the market’s surface that’s led to significant sector ranking shuffles.
Look at January’s rankings:
And how different they are from February’s rankings:
The market’s push-and-pull action is further reflected in the “big money” professional investor inflow and outflow data for 2025, which is nearly equal through the end of February:
This push-and-pull action in money flows is the main reason there was sideways trading throughout February. That’s especially true over the last week of the month, when it was really sloshy.
For us, this is clearly a result of investor fears resurfacing and risk-off trades. But from a bigger picture perspective, keep in mind that the S&P 500 is down only a few percent from all-time highs made just a couple weeks ago. And as we cap off earnings season, let’s again remember it's not out of the ordinary for the market to act tired and need a rest as it heads into the lull period after earnings season.
The reintroduction of volatility alongside healthy overall volumes has had a recent negative effect on MAPsignals’ trusty Big Money Index (BMI), as you can see:
The BMI is a 25-day moving average of “big money” professional investor buys and sells netted. The question about the current state of the BMI is are we seeing a short-term blip reflected in its movements, or will this become a trend over time?
This is what we will be keeping a very close eye on.
Another data point that is critically important right now from a trend perspective is the percentage of S&P 500 stocks that close above their 50-day moving averages. As of this writing, almost 55.5% of S&P 500 stocks were still above their 50-day moving averages:
If this metric goes below and stays below 50%, it could be a sign of a weakening market trend.
As a result, this is another data measure we will be keeping a very close eye on.
Overall, as we sifted through this series of push-and-pull data, we find that there are currently signs of short term weakness. However, this is not necessarily unexpected. It’s important to never forget that the market does not go up in a straight line forever.
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*Past performance does not guarantee future results.
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* The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
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