The Great Divide

Earnings season is officially picking up steam, and Tuesday gave us the busiest day so far for S&P 500 earnings reactions.

We heard from conglomerates, autos, steel, homebuilders, financials, aerospace and defense, oil services, and a diagnostics and research stock. 

In other words, we finally got the kind of broad earnings tape that gives us a clean read on what the market is rewarding and what it's rejecting.

And that's exactly why we love this part of the quarter.

Every report gives us another clue. 

Every reaction tells us something about where buyers are showing up, where sellers are still in control, and which stocks deserve our attention.

Tuesday’s message was pretty clear.

A lot of companies reported solid headline numbers, but many of them still got punished.

That's not something we ignore.

Looking at the Beat Sheet, MSCI $MSCI was the only company to report a true double miss, and the stock fell more than 10% as a result.

*Click the image to enlarge it

But the weakness wasn't limited to companies that missed expectations.

Overall, 12 stocks fell, despite mostly solid headline results.

That tells us that expectations were too high, and the market wasn't satisfied with their results.

But there were still winners...

General Motors $GM, Hasbro $HAS, Steel Dynamics $STLD, and 3M $MMM all rallied after their reports.

And the two reactions that stood out most to us were 3M on the upside and Danaher on the downside.

Let’s start with the winner.

3M is a great American industrial company. 

This is the kind of business most investors know, even if they do not think about it every day.

The company makes thousands of products across industrial, safety, automotive, electronics, consumer, advanced materials, and other end markets. 

We’re talking tape, adhesives, abrasives, respirators, filtration, electrical materials, automotive products, semiconductor solutions, data center technologies, and a long list of other products that are used across the real economy every single day.

For years, though, the stock has been a mess.

3M peaked in 2018, spent years grinding lower, and eventually fell into the mid-$70s in 2023. 

But that downtrend is no longer the story...

The stock has spent the past few years carving out a massive accumulation pattern, and now it's pressing right into the most important level on the chart.

That level is $175.

$175 was the peak in 2021, and resistance again late last year and earlier this year.

And after Tuesday’s report, 3M is right back at the scene of the crime.

The bulls haven't quite finished the job yet, as the stock tried to break above $175 after earnings but closed just below that level. 

Still, the setup looks fantastic! 

A decisive breakout above $175 would complete this multi-year bearish-to-bullish reversal and likely open the door toward the old 2018 highs near $217.

And based on the size of this base, we wouldn't be surprised to see 3M eventually make new all-time highs.

3M reported a double beat and rallied more than 7%, producing the strongest reaction score on Tuesday’s Beat Sheet.

In addition to the solid quarter, the management team also raised full-year guidance for sales, EPS, and free cash flow.

That's exactly what we want to see from a turnaround story.

Better growth, better execution, better cash flow, higher guidance, and a stock that's now pressing against a major breakout level.

With improving technicals, fundamentals, and earnings sentiment, we expect the buyers to maintain control of MMM for the foreseeable future.

Now let’s look at the other side of the tape.

Danaher is one of the largest diagnostics and research companies in the world. 

This is a high-quality business with exposure to life sciences, biotechnology, diagnostics, bioprocessing, and other attractive healthcare end markets.

But great companies can still become terrible stocks.

And that's exactly what the chart is saying right now as price has carved out a massive distribution pattern over the past five years.

DHR peaked in 2021, failed to reclaim those highs in 2024, rolled back toward support, and has now decisively broken below the key $182 level.

$182 was support in 2021, then again in 2023 and 2025. 

And now it has failed.

This is a major change in character.

Following Tuesday’s earnings reaction, Danaher closed below $182 and posted its worst earnings reaction of the 21st century. 

And so long as DHR remains below that level, the path of least resistance is decisively lower for the foreseeable future.

And based on the size of this top, the stock could have a lot more downside from here.

Here's what makes the reaction so concerning.

Danaher didn't miss the market’s headline expectations. 

The company reported a double beat, and the management team raised its full-year adjusted EPS guidance.

On paper, the quarter didn't look like a disaster.

But the market didn't care!

Instead of rallying on good news, DHR fell 11% for its worst earnings reaction of the 21st century.

This is why we always say earnings are not just about the numbers. 

They are about how the market responds to the numbers.

When a stock beats expectations, raises guidance, and still gets smoked, that's a major warning sign.

With Danaher, the fundamentals aren't the biggest problem. 

The problem is the market’s willingness to pay for those fundamentals.

The technicals are breaking down, the earnings sentiment is terrible, and the stock just resolved a massive top.

DHR is the kind of setup that we want to run away from.

At the Beat Report, we're looking for stocks where the technicals, fundamentals, and earnings sentiment are all pointing higher.

Right now, 3M is getting closer to that kind of alignment.

Meanwhile, Danaher is moving the other way.

If you want more analysis like this, join the Beat Report today.

You'll get access to our next trade alert, our current watchlist, and a list of stocks we believe have the strongest alignment across technicals, fundamentals, and earnings sentiment.

Stay safe out there,

-The Beat Team

Editor's Note: There's a bull market building in financials that almost nobody is talking about yet, and Steve Strazza thinks it's about to hit the front page. 

He's breaking down exactly what's happening and how to play it in a FREE live training this Thursday at 4:30 PM ET. 

Save your seat here.