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In the world of big business, this is about as organic as it gets: U.S. companies are not living up to expectations and shares are falling. Wall Street has, essentially, been on a three-year winning streak, a month or two notwithstanding, and that means the economic recovery has to perform to give the gains some credence.
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The rubber has met the road when big firms, which still are not hiring to anybody's satisfaction, report results that disappoint investors.
If that phrase seems overused, there's a reason for it and that reason is to explain the tail spinning on Friday and Tuesday with the Dow Jones industrial average off 295 points and 243 points, respectively.
When corporations meet expectations, it means their value has been priced gradually, organically, into the market. When they exceed or fall short of expectations, investors make adjustments immediately.
Disappointment for the third quarter has been all to common. Most recently, DuPont, United Parcel Service Inc. and McDonald's failed to pass muster.
Google missed expectations and here's the definition of an immediate adjustment: Google share values dropped 8 percent.
Others have squeaked by. Facebook came around with $153 million in revenue from ads designed for mobile phones. That upturn, announced Tuesday, will likely give Facebook shares a gentle uplift, but hardly enough to make up for the firm's fall from grace. Since its initial public offering, Facebook shares are down 50 percent.
Bank of America did better than expected, beating extremely low expectations.
BofA was expected to lose money in the quarter, but earned $340 million instead. That's tips at the bar in New York City.
PepsiCo also did better than predicted, but not in the sense that it clobbered naysayers. Its income fell 5 percent in the quarter, but its revenue rose 5 percent, mostly because it raised prices 4 percent. Adjusting for inflation it did not do so well as it might have otherwise.
In recent sessions, bellwether crude oil has dropped sharply, taking a cue from equities and economic data. A downward correction took $6 per barrel off of West Texas Intermediate crude in New York, knocking the commodity off of a long-held perch at $92 per barrel. By Tuesday, it had dipped below $87, although the closing price was slightly higher.
Asian stocks wobbled Wednesday. The flash estimate – without complete data – showed the HSBC Purchasing Managers' Index in China still negative at 49.1, although the index was higher than September's mark of 47.9. In the index, numbers above 50 indicate growth.
In international markets Wednesday, the Nikkei 225 index in Japan fell 0.67 percent, while the Shanghai composite index in China was flat, rising 0.07 percent. The Hang Seng index in Hong Kong rose 0.31 percent, while the Sensex in India fell 0.44 percent.
The S&P/ASX 200 in Australia dropped 0.82 percent.
In midday trading in Europe, the FTSE 100 index in Britain added 0.26 percent, while the DAX 30 in Germany climbed 0.35 percent. The CAC 40 in France rose 0.48 percent, while the Stoxx Europe 600 gained 0.49 percent.
