As companies in the S&P 500 (^GSPC) — especially Big Tech leaders — begin to report first-quarter earnings, it's evident companies' prospective stocks are reacting negatively to overly positive earnings news. Evercore ISI Senior Managing Director Equity of Derivatives and Quantitative Strategy Julian Emanuel joins Market Domination to discuss how stocks are responding to quarterly results, as well as touch on the trajectory of the S&P 500 as the likelihood of interest rate cuts in 2024 by the Federal Reserve starts to dissipate.

"The bigger message is that the companies that have done well in some cases have seen their shares perform poorly... case in point, it's the double beats, the ones beating on EPS and revenues," Emanuel tells Yahoo Finance. "And the share price reaction that is... less than stellar, and some cases outright poor, that's what really tells us that the broader market is having digestion problems in and around this earnings season."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

Video Transcript

- Let's talk a little bit more about earnings season as we get that ramp up. It brings along the usual volatility we've seen in stocks. We've seen some beats. We've also seen companies that miss on the top and bottom line, really punished by investors here. Joining us now to discuss, Julian Emanuel is a senior managing director and head of equity derivatives and quant strategy at Evercore ISI.

So Julian, let's start with a stat you had in your note today about the way companies are being punished for that double miss and, if anything, that says to you about sentiment on the Street and just the way we've seen markets acting over the last couple of weeks.

JULIAN EMANUEL: Well, so obviously, the volatility across markets broadly is higher these last several weeks, and that is sort of in line with our more cautious view in the near to medium term. But when you think about earnings, actually, the violence both in terms of beats and misses was something we saw last reporting season. And, obviously, it's very early.

A small preponderance of companies have reported. But to your point, the misses have been punished, which is what you would expect in a more hostile-type tape that's pulled back the way it has. But to us, the bigger message is that the companies that have done well in some cases have seen their shares perform poorly.

The world's leading money center bank, which reported a week ago Friday, really a case in point. It's the double beats, the ones beating on both EPS and revenues and the share price reaction that is less than stellar and, in some cases, outright poor. That's what really tells us that the broader market is having digestion problems in and around this earnings season.