Analysts Probe Puzzling Market Reaction to Positive Earnings of S&P 500 Stocks

Despite an impressive Q2 earnings season with 79% of S&P 500 companies reporting actual EPS above expectations, there has been a puzzling market reaction. Companies that beat earnings estimates have experienced an average price decrease of 0.5% two days before the earnings release through two days after, in contrast to the usual price increase. This trend is the largest average negative price reaction to positive EPS surprises since Q2 2011. Analysts are perplexed by this unexpected behavior and suggest that stock expensiveness and overvaluation may be contributing factors.