- Stocks have strong week
- Banks report mixed Q2 results
- Many high-profile companies report earnings next week
- Signs of economic growth and inflation accelerating
Equity returns were strong across the board last week as all three major domestic market indices advanced 1.50% or better. The Dow Jones Industrial Average is once again in positive territory for the year as the index gained 2.30%. Q2 earnings season kicked off with Pepsi turning in great results on Tuesday. Three big banks reported Friday and results were mixed. J P Morgan beat both top and bottom line estimates. Citi beat profit estimates but came up short on revenue expectations. Wells Fargo missed both revenue and earnings estimates. All three stocks traded off and the financials as a sector declined for the day. For all the positives supporting an advance in the banks and financials the sector continues to underperform.
The markets may be getting use to the tariff and trade war talk (and action) as technology and consumer discretionary stocks lead returns for the week. Industrial stocks which had been hit hard by tariff talk rebounded as well. Telecommunication and utility stocks which have rallied over the last month were the worst performers on the week, and telecommunications and consumer staples continue to be the worst performing sectors year-to-date.
Many high-profile S&P 500 companies report next week as outlined below. Expectations are very high so expect companies reporting below expectations or revising forward guidance downward to be punished fairly severely. Hopefully, the solidness of corporate earnings and strong fundamentals will dominate news flow and the market will take a break from focusing on uncertainties (trade war scenarios and implications of flattening yield curve).
Recent economic releases have been pointing towards accelerating economic growth and inflation in the second half which has been highly anticipated by investors but hasn’t materialized. We’ll see.
On the economic calendar for next week: June retail sales data is released Monday by the U.S. Census Bureau as is June housing starts on Wednesday. The Philadelphia Fed reports its Manufacturing Business Outlook Survey on Thursday.
Q2 earnings season intensifies, companies reporting results include:
Monday – Bank of America, BlackRock, and Netflix
Tuesday – JNJ, UnitedHealth Group, Goldman Sachs, and CSX
Wednesday – Novartis, Morgan Stanley, US Bancorp, M&T Bank, Northern Trust, and Alcoa
Thursday – BB&T, Bank of New York Mellon, Philip Morris, Fifth Third, KeyCorp, and Microsoft
Friday – SunTrust, GE, Honeywell, and Celanese
Indices for the week and YTD are as follows:
S & P 500 up 1.50% for the week; YTD index return is 4.78%
NASDAQ Composite up 1.79% for the week; YTD index return is 13.36%
Dow Jones Industrial Average up 2.30% for the week; YTD index return is 1.21%
Benchmark 10-year Treasury bond yield stands at 2.83% - virtually flat.