Pre- vs. Actual
Brian Trumbore
President/Editor, StocksandNews.com

I'm currently out West, specifically in Laramie, Wyoming, doing my rediscover America thing, so I don't have access to my vast Wall Street history library, but I did bring along my figures for the S&P 500.

With the recent rally in the market off the Oct. 9 lows, much has been written that this was, of course, expected because earnings have been coming in better than anticipated. Folks have also said that this shouldn't come as a surprise. After all, Wall Street always declines during the earnings "pre-announcement" period, while it then advances during the actual announcement of earnings, most of the bad news having already been released.

Well, I'm here to tell you, this isn't necessarily so. I went back 11 quarters, all the way to the final bubble quarter of 2000, and found that there is NO official pattern of behavior.

While this isn't scientific, and no Wall Street firm or strategist can do any better than I am about to, the fact is?sometimes the market goes up, sometimes it goes down. And boy, what a surprise that is.

What I did is take the 3 weeks before earnings start coming through (the best gauge of pre-announcements) each quarter and measure this against the 3 key weeks of actual earnings announcements. For example, looking at the second quarter of 2002, I examined the period 6/14-7/5 versus 7/5-7/26, which covers the vast majority of S&P earnings.

The result? Assuming that this current earnings announcement period for the third quarter stays positive, we have the following.

--For the pre-announcement period, the S&P 500 fell 8 out of 11 times. [An average of 3.3%.]

--For the announcement period, the S&P fell (again) 6 out of 11 times. [An average of 5.3%.]

In other words, again, those who say that, "Of course, stocks go down during the pre-announcement period because it's negative news, but once earnings start in earnest, since it's mostly good news, stocks rise," are full out of it!!! Case closed.

The market goes up because it wants to go up, or, vice versa, it goes down because it wants to go down.

Sure, economic fundamentals are very important, as are individual company earnings, but to base a theory on the "pre-" versus "actual" is merely looking for trouble.

Now the numbers. All figures are for the S&P 500. The first two are for the 'pre-announcement' period, the third number is the end of the main 'announcement' period.

9/13/02?889.81
10/4/02?800.58

10/23/02?896.14?technically, another two days left.

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6/14/02?1007.27
7/5/02?989.07

7/26/02?852.84

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3/15/02?1166.16
4/5/02?1122.72

4/26/02?1076.32

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12/14/01?1123.09
1/4/02??1172.51

1/25/02?..1133.28

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9/10/01?1092.54
10/5/01?1071.38

10/26/01?1104.61

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6/15/01?1214.36
7/6/01?..1190.59

7/27/01?1205.82

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3/16/01?1150.53
4/6/01?.1128.43

4/27/01?1253.05

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12/15/00?1312.15
1/5/01??1298.35

1/26/01?..1354.95

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9/15/00?1465.81
10/6/00?1408.99

10/27/00...1379.58

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6/16/00?1464.46
7/7/00?..1478.90

7/28/00?1419.89

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3/17/00?1464.47
4/7/00?..1516.35 [Includes all-time high of 1527?3/24]

4/2/00?..1452.43

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The preceding data was culled from the editor's personal files. It is deemed to be correct, and I guarantee you won't find this anywhere else.

Due to travel, Wall Street History will return November 8.

Brian Trumbore