$50 Billion(!) Surges & Swoons — in One Stock!
The big surprise about this quarter’s earnings surprises?
They’re actually a surprise.
And how do you know that?
By the mammoth moves — both up and down — in the stocks of companies announcing those earnings immediately afterwards.
If you’re not keeping score, here’s the roster of surprises to date:
Up: Google, Amazon
Down: Apple, IBM, United Technologies
“Loose Lips Sink . . “
Once upon a time — OK, less than a decade ago — stocks about to be acquired, as well as stocks about to announce disappointing news, would mysteriously start to levitate or deflate (as the case may be) days ahead of the formal announcement.
The obvious inference?
Insiders got wind of the news, and were trading ahead of it.
I’d hardly argue that today’s stock market reflects a level playing field — can you say, “high frequency trading?” — but it’s gratifying that big companies today are more circumspect about their corporate disclosure.
P.S.: It’s hardly an excuse, but keeping mergers and acquisitions quiet is exponentially more challenging than announcing earnings because of all the parties involved in the former (target company, acquirer company, M&A attorneys for both, investment bankers, etc.).
Believe it or not, years ago, occasionally employees at financial publishers would leak the news, which spawned numerous cases testing the definition of “insider trading.”
