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Earnings Jolt Stocks Like Never Before as ETFs, Algos Get Blame

  • Instances rise of big price swings after results are announced
  • Researchers see link to ascent of ETFs and passive investing
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Just because U.S. corporate profit growth has ground to a halt doesn’t mean the impact of earnings announcements in the stock market has diminished. In fact, it’s never been bigger.

Swings such as Alcoa Inc.’s 11 percent plunge last week have become increasingly common since the financial crisis, according to a study by Leuthold Group that looked at how shares reacted in 193,000 instances going back to 1996. The Minneapolis-based fund manager found that earnings-day stock moves exceeding 5 percent doubled in seven years, even as the accuracy of analyst forecasts deteriorated only slightly and market volatility stayed the same.