| NEW YORK
NEW YORK Fourth-quarter U.S. corporate earnings have proven to be stronger than expected, and yet stock investors have greeted them with a big yawn.
Second-quarter and third-quarter earnings drove stocks higher last year, helping the benchmark Standard & Poor's 500 index finish the year with strong gains.
But with the market about halfway through the latest reporting period, company results have sparked little upside as some investors see no justification to push stocks higher after the market rallied more 70 percent from its early March lows, analysts said.
"A lot of positive expectations had been built into stock prices going into the earnings, so even though there were some upside surprises with raised guidances, in a lot of cases that had already been built into stocks' prices," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
On Friday, stocks registered a third week of losses, and the S&P 500 finished its worst month since February 2009, even though more than two thirds of companies that have already reported fourth-quarter results have beat expectations.
If stock prices already reflect higher fourth-quarter profits, investors may be unwilling to push prices further, the analysts said.
The theory could be tested next week as Dow Chemical, Pfizer, Yum Brands and about 90 other S&P 500 companies are due to report results.
Even though many individual companies have reported solid results, including Microsoft and Amazon late Thursday, their stock prices have fallen in the next trading session. Microsoft dropped 3.4 percent to end at $28.18 on Friday while Amazon dipped 0.5 percent to $125.41.
On January 19, International Business Machines raised its outlook and reported a stronger-than-expected profit, but its stock price, which had already rallied 60 percent in the past year, fell.
"Looking at all companies that have reported, the average stock has declined 0.09 percent on its report day," analysts at Bespoke Investment Group said in a research note.
Companies missing estimates are seeing their stocks punished more than companies beating estimates are seeing their stocks rewarded, they found.
"There (may be) worries the consensus forecast for the economy and for corporate profits is too high," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, in Albany, New York.
Last week, fears the White House's plan to curb bank risk-taking would cut profits rattled investors, along with China's efforts to prevent the world's third-largest economy from overheating.
Still, S&P 500 fourth-quarter earnings are seen up 206 percent from a year ago, when corporate profits were hit hard by the economic downturn, according to Thomson Reuters. That percentage is up from 193 percent last week.
Of the 220 S&P companies that have already reported, some 78 percent have beaten earnings estimates, while 8 percent have matched estimates and 14 percent have missed targets, according to Thomson Reuters' director of U.S. earnings, John Butters.
The percentage topping estimates is well above the 61 percent average since Thomson Reuters began collecting data in 1994.
Revenue results have also been strong, with 67 percent of companies beating estimates, and the fourth quarter is expected to be the first period of positive revenue for the S&P 500 since the third quarter of 2008.
"These are really good earnings, and the question is what's happening to the market," Johnson said.
(Editing by Leslie Adler)