Earnings season is doing something it hasn't done since beginning of the bull market

Independent research firm Bespoke Investment has uncovered an earnings trend that hasn't happened since the bull market started.

According to its co-founder Paul Hickey, companies are seeing their strongest stock price performances on the days they're reporting earnings in a decade.

"The average return of companies reporting earnings so far this earnings season has been a gain of 1.1 percent," Hickey said Monday on CNBC's "Trading Nation." "We haven't seen that strong of a pace of performance since the Q1 2009 and Q2 2009 reporting periods."

The trend reflects S&P 500 companies that have already released fourth-quarter results. Roughly half have reported so far.

"We're seeing investors come in, bid up stocks at the open and that strength follows throughout the trading day," Hickey said. "There's really been a rush into these names as they've been reporting."

However, Hickey notes the robust move higher isn't because earnings are stellar. Rather, it's due to pessimism.

Earnings results relative to expectations haven't been as good in recent quarters. Yet, he points out the market is embracing them with "a big kiss."

"Coming into earnings season, we were noting how analysts' negative revisions were at the worst rate to the downside since 2015-2016. So, it set the bar really low," he said. "The market sentiment was so washed out, and we're just seeing stocks rally."

Since fourth-quarter earnings season kicked off Jan. 15, the S&P 500 is up more than 5 percent. Hickey suggests the bullish trend could be sustainable into spring.

"We're seeing more companies lowering guidance than raising guidance. I think that's just because there are a lot of big unknowns out there regarding China and to a lesser extent the federal government," Hickey said. "If neither of those things do go wrong, then you have a low bar going into next earnings season, which could be good."


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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