Stock selling has accelerated during Tuesday’s session, as investors weigh the uncertainty growing in Europe following two national elections on the weekend.
Concern appears to be mounting that a coalition of left-leaning parties in Greece will form the new government and renege on bailout agreements, repeal labour reforms and nationalize banks.
In Toronto, the S&P/TSX composite index has plummeted 241.75 points, or 2 per cent, to 11,618.91, lead by the materials sector, which is down almost 5 per cent. Kinross Gold fell 6 per cent and Suncor Energy lost 3 per cent.
In New York, the S&P 500 was down 18.46 points, or 1.4 per cent, to 1351.12. All sectors were in the read, including energy, down 3 per cent, and materials, down 2 per cent.
Losses may continue, but in the long run markets react to corporate earnings, and so far this earnings season has surprised on the upside.
Among S&P 500 companies, 441 have now reported first-quarter results, with 292 beating estimates, 104 missing and 45 meeting them, according to Standard & Poor’s Capital IQ.
At the beginning of April, expectations were for profit growth just shy of 1 per cent, compared with the first quarter of 2011. Today, with most results in, the consensus is that profits will rise by more than 7 per cent. For the full year, expectations are for earnings to increase by 7.4 per cent, up from expectations of 6 per cent at the start of April.
Just a month ago, the health care and financials sectors were seen as laggards that would weigh down overall results. But both delivered better-than-expected performance. The decline in profits for the materials sector was just half of expectations and telecom profit slid only 5 per cent, rather than the forecasted 16 per cent.
In terms of revenue, expectations are for overall growth of 6 per cent in both the first and second quarters, and of 7 per cent for the full year, Capital IQ says.
Those numbers are worth considering as emotions heat up again around Europe’s lingering debt crisis.