Stephen Gandel is a Bloomberg Gadfly columnist covering equity markets. He was previously a deputy digital editor for Fortune and an economics blogger at Time. He has also covered finance and the housing market.

Investors have all of a sudden become surprise-party poopers.

Shares of companies that have reported both better-than-expected profits and sales for the second quarter have barely budged this earnings season. It's the least fist-bumping investors have done for great quarters in 17 years.

To be sure, Wall Street earnings beats are always a bit manufactured. Analysts often lower their estimates toward the end of the quarter, or soon after it, only for companies to hurdle over that lower bar. On average, over the past five years, 68 percent of the companies in the S&P 500 have reported better-than expected earnings. This year the number is slightly higher at 73 percent. Despite the kabukiness of it all, investors have generally seen those positive earnings surprises as good news. Shares of companies that have reported both better-than-expected earnings and sales have generally outperformed the market soon after reporting them.

Overdeliver and Underperform
Investors are not pushing up shares of companies that beat analysts expectations as they have in the past.
Source: Bank of America Merrill Lynch
Stock return is percentage points vs. S&P 500 over similar period. Data as of 7/28/17

Not the latest quarter, though. Through Tuesday morning, 314 of the companies in the S&P 500 have reported their earnings for the three months ended June 30. Of those, 174 had profits and sales that were better than analysts' expectations. Yet shares of those companies were flat compared with the rest of the market in the 24 hours after they reported, according to research from strategists at Bank of America Merrill Lynch. Five days later, the same stocks performed slightly worse than the rest of the market.

Consider the big banks. Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. reported better-than-expected earnings per share by 11 percent, 6 percent and 8 percent, respectively. Yet their shares fell on the day they announced their earnings. JPMorgan's shares are still down slightly. One exception appears to be Apple Inc., whose shares jumped after better-than-expected earnings on Tuesday evening.

Earnings Errors
Shares of a number of the big banks fell even after reporting better-than-expected earnings
Source: Bloomberg
Percent is stock market return from the first day of the period

Since 2000, shares of companies reporting better-than-expected earnings have generally risen about 1.6 percentage points more than the market on the day after they announce earnings. The last time that stocks on average failed to jump on good earnings was the second quarter of 2000, 17 years ago.

It's not clear exactly why the cheers for good earnings have been muffled. Savita Subramanian, Bank of America Merrill Lynch's top U.S. equity strategist, says it's potentially a bad sign. Investors are overly optimistic, anticipating good news. That can be a sign of a market top. The S&P 500, for example, had not yet peaked in July 2000, even though tech stocks had already started to drop, when companies started reporting their profits for the second quarter that year. The market's massive slide began the next month. The Dow Jones industrial average closed at a record on Tuesday.

But in 2008, the last time the market peaked, investors were rewarding companies that reported good earnings as usual. But while it might not be a sign of a peak market, it could be a sign of peak earnings optimism. First-quarter earnings were the best they had been in years. Analysts were expecting a slowdown for the next one. Investors, it now appears, weren't. If the third quarter can't keep the pace -- and analysts are expecting it won't -- there could be trouble ahead.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Stephen Gandel in New York at

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Daniel Niemi at