Defensive posture emerges in earnings, but not uniformly

Investors are showing less patience with earnings results. In the most recent batch of reports, roughly half of the stocks advanced, but a handful of major letdowns dragged the average down. Technology and consumer stocks were especially weak, though some clear winners still appeared. The overall situation indicates a market that is selective and more cautious.

Main points from the recent earnings reactions

• Winners are still present. Around 48% of the stocks in the September 9 earnings group moved higher.

• Sizeable declines have an impact. When weighted by market cap, the group's reaction was roughly -2.7%.

• Which sector matters. Technology and consumer cyclical names were relatively weak, while industrial stocks showed more strength.

• Follow-through is the next thing to monitor. Look to see if the losing stocks stabilise and the winners retain their gains.

How can earnings sentiment appear weak when nearly half of the stocks increased? The difference lies in the number of declining stocks versus the severity of their falls. For the September 9 group, the picture was as follows: An equal-weight average gives each stock the same importance. A market-cap-weighted average assigns more weight to larger companies. The median represents the midpoint stock. The notable observation is the difference between the nearly unchanged equal-weight figure and the significantly worse outcome when size is factored in. This points to a few major disappointments pulling down the overall sentiment. These numbers apply only to the earnings group examined, not to the broader U.S. market. The timing of reports also played a role. Firms that released results before the start of trading on September 9 had better reactions individually. The weakness came from companies that reported after the prior day's close, dragging the aggregate down.

What earnings reactions account for the cautious stance? Some drops were notable. Casey's General Stores (CASY) lost roughly 14%, ServiceTitan (TTAN) around 30%, and Chewy (CHWY) almost 11% on that day. Still, investors rewarded other firms. Signet Jewelers and Academy Sports saw solid increases, and Sunbelt Rentals also rose, highlighting the variety of results in the same batch. A large negative contributor like Casey's had a disproportionate effect on the total number. This underscores the concentrated nature of the weakness. That does not mean the losses are insignificant, but it restricts the scope of their interpretation. Another cautionary sign appeared: more stocks had big downside moves beyond the options market's anticipated range than had similar upside moves. Simply put, disappointments more often exceeded the price swings that traders had expected.

What do earnings reactions indicate about what investors anticipate? A stock price drop does not necessarily imply that the company's earnings or revenue fell. ServiceTitan, for instance, posted a 21% year-over-year revenue increase in the latest period, despite its stock experiencing a sharp drop. This growth is recorded in its fiscal second-quarter results. Investors judge results based on what they anticipated and what the stock price had already discounted. They also take into account the management's forward guidance. Thus, a company can deliver growth and still disappoint. Similarly, a struggling business can see a rally if its numbers or guidance beat gloomy expectations. In my view, the recent moves show investors are becoming less tolerant of misses. That serves as a caution regarding expectations and positioning; by themselves, these price changes do not indicate a general decline in corporate earnings.

Where is strength in earnings still visible? The latest earnings group showed a clear sector divide:

• Technology: Reactions were particularly weak.

• Consumer cyclicals: Mostly under pressure, though some individual names performed well.

• Industrials: Relatively strong.

• Healthcare: Mixed but fairly resilient.

These observations apply to the companies that recently reported, not to every firm in the sector. Signet and Academy Sports are good examples of how even a weak consumer category can have notable winners. A sector's trend can help structure a watchlist, but the specific stock reactions remain important.

Is the market dismissing every technology earnings report? The technology landscape recently has shown wide variation. Around September 9, the rolling five-day returns for some recent reporters were approximately: Note that these are rolling returns, not returns from each firm's specific earnings date. They reflect the performance over a shared window, which can include trading both before and after the reports. The difference implies that investors are differentiating more finely among technology and AI-oriented companies. Dell and HPE stand as significant examples of strength in contrast to the broader weakness. Traders should ask if a given company can meet high expectations and maintain buying momentum beyond the immediate reaction.

What did after-hours trading on September 9 contribute? The early after-hours earnings group on September 9 provided a further caution. Only roughly a quarter of the names were trading higher, and larger firms' reactions were heavily negative. But this group did not consist mainly of the biggest U.S. mega-caps. So its wider market importance was limited. These were initial reactions. After-hours trading often has lower liquidity, and the next regular session may give a different outcome. The early weakness is worth noting, but it should be treated separately from the final September 9 figures.

What should traders and investors keep an eye on going forward? Will the earnings losers stop falling? If they stabilise, it may signal that some disappointments are getting absorbed. If they have repeated failed bounces and new lows, the defensive view gains more weight. Will the earnings winners retain their gains? A strong initial jump is more convincing if buyers step in to defend pullbacks. If the rally fades quickly, it indicates that enthusiasm is thin. Will weakness spread across sectors and market caps? Continued strength in industrials would support the case for selectivity. If selling broadens, especially with larger names underperforming smaller ones, the warning becomes more significant. Will downside surprises keep exceeding expectations? If repeated declines go beyond the options market's expected range, it suggests investors are still not fully discounting the potential severity of negative reactions.

I am also monitoring the changing patterns in technology, particularly the shift from software toward AI infrastructure names, to determine whether the pace in stocks such as CoreWeave and AMD can continue given the headwinds for Salesforce and ServiceNow. The capital rotation occurs against a wider backdrop of market nervousness. As Greg Michalowski pointed out, the main indexes dropped for a third consecutive day as oil prices rose and Treasury yields climbed, ahead of important CPI and PPI figures. Another factor complicating the tech outlook: Adam Button recently warned about rising regulatory and safety concerns around AI development. He suggested that the eventual winners could be traditional "HALO" stocks that can use AI to boost margins, rather than pure-tech firms.

How can traders make use of this data? Relative strength: If an earnings winner holds its gains while its sector weakens, it may deserve closer attention. Losing that support would weaken the case. Failed rallies and persistent losers: If a stock repeatedly fails to recover after disappointing results, watch whether sellers remain in control. A sustained recovery would challenge that bearish interpretation. Sector rotation: If industrial strength persists while technology remains weak, sector ETFs may help express that difference. Their actual holdings and price behavior need to confirm the idea before it becomes a trade. A big drop alone is not justification for shorting. Severe selloffs can be followed by sharp rebounds, so the entry price and the level where the thesis breaks matter a lot. My concern would increase if earnings winners started giving back gains while losses expanded into sectors that are currently holding up. If losers find a floor and winners keep drawing interest, the argument for a selective market would stay intact.

Data note: Numbers are rough and reflect the picture as of September 9, 2026. The rolling five-day returns do not represent precise post-earnings returns. After-hours moves are subject to change. The earnings groups examined do not capture all of U.S. corporate earnings.