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Executive April Summary

by Chris McGee, CFA CAIA
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Earnings releases last week were plentiful; just under 50% of S&P companies have reported earnings for Q1. Approximately 80% of companies have beat earnings estimate which is above the norm. Per Barron’s, to date earnings are up 2% in Q1 on a year-over-year basis which was not expected. The “call” coming into the quarter was for aggregate S&P 500 earnings to be slightly negative (and then flat for Q2).

Reports have been mixed with many of the tech companies exceeding expectations (Amazon and Microsoft) but also some disappointments like Exxon and 3M late in the week. Also note Intel disappointed (it dropped nearly 9% on Frida) and sent many of the semiconductor stocks south on Friday. As the earnings calendar below shows, next week will be another week of high visibility earnings releases.

 

 

* Q1 S&P 500 earnings showing positive growth

* Economy growing steady with little inflation

* Health Care stocks rebound

* Consider rebalancing accounts


Also of note was the release of Q1 GDP Friday which came in above consensus expectations at north of 3%. A closer look at the composition of the headline number suggest the economy isn’t as strong as the headline number suggests. In aggregate economic releases show the domestic economy continues to grow at a steady if unspectacular rate with very low inflation. The yield on the 10-year Treasury bond actually dropped after the Q1 GDP release and closed the week at at 2.50%

 

Looking at specific sectors last week Health Care stocks led all other sectors and are rebounding from several down weeks; they advanced close to 4%. Technology issues were up close to 2%. The more cyclical sectors were negative for the week (as was Energy and Telecommunications). The Dow was the only index of the 3 major indices that was negative; poor earnings reports from 3M, Exxon, and Intel are partially responsible.

 

The NASDAQ, S&P 500, and Dow are up ~23%, ~17%, and ~14% respectively year-o-date. Now is the time to raise funds in accounts for client liquidity needs if it has not been done already, and to consider rebalancing if account allocations are hitting or near the upper bound for their respective equity allocation objective.

 

Economic releases next week include the release of personal income data for March by the Bureau of Labor Statistics (BLS). Also, on Monday the Fed releases the Personal Consumption Expenditure for February (this is their gauge of inflation). Both the Chicago Purchasing Manager’s report and the Consumer Confidence Index for April are reported on Tuesday. On Wednesday ADP releases its National Employment Report. BLS reports both productivity and labor costs on Thursday.

 

Earnings reports next week include:


Monday – Alphabet (aka Google) and Western Digital

Tuesday
– Advanced Micro Devices, Conoco Phillips, Eli Lilly, GE, GM, Mastercard, McDonald’s, Merck, Mondelez, and Pfizer

Wednesday
– ADP, CME, CVS, Estee Lauder, and Qualcomm

Thursday
– Activision Blizzard, CBS, Cigna, Dow DuPont, Zoetis, and Under Armour

Friday
– American Tower, Dominion Energy, and Noble Energy

 

Indices for the week and YTD are as follows:

  • S & P 500 up 1.20% for the week; YTD index return is 17.27%
  • NASDAQ Composite up 1.85% for the week; YTD index return is 22.77%
  • Dow Jones Industrial Average down .06% for the week; YTD index return is 13.79%
  • Benchmark 10-year Treasury bond yield stands at 2.50% - falling 6 basis points on the week

 

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