Don’t Fret Price Reversals Following Good Earnings Reports – They Are Signs Of A Healthy, Appropriately Valued Stock Market

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Apple’s excellent earnings report produced a stock price jump, followed by a drop Apple’s AAPL up-down, 24-hour price move is a perfect example of what’s happening in this earnings period. The reason those moves are desirable is that they are evidence of the link between pricing and fundamentals. The earnings reports released just after the stock market’s close are especially noteworthy.

The media can report the results before the next day’s market opening. Then when the trading begins in earnest, the action fully reflects Wall Street’s view. Here is Apple’s price action, shown over the past five days, using half-hour intervals: “Apple reported an insanely great March quarter, with revenues and profits far higher than expected. It exceeded expectations in every product line and in every geography. And to top things off, Apple raised its dividend by 7%, while increasing its stock repurchase plan by $90 billion. “At least a dozen analysts raised their targets for the stock price ( more...