Tuesday, 11 July 2017

Q2 Earnings Are Knocking

Posted by Anonymous at 12:45 Labels:

A new earnings season has finally arrived. The first quarter cheered investors significantly, allowing major stock indexes such as the S&P 500 to rise almost 8 percent year to date.

However, latest economic reports in the United States haven’t been as promising as those released in the first three months of the year. For such reason, investors developed doubts on whether economic growth will be able to expand further or rather move backwards.

And now it’s time to find out. Market analysts from key financial institutions are saying better-than-expected earnings could provide enough support for an extended equity rally.

On the contrary, downbeat earnings from key players would not only prevent stocks to continue growing in the near future, it could also threaten all gains made until this moment.

According to FactSet, earnings estimates for the entire S&P 500 notched down only two percent through the second quarter, which is remarkably low. That could be interpreted as a very bullish signal for the private sector, considering the usual adjustment in expectations is about 4 percent.

While five percent of companies have already released second-quarter earnings and revenues, they are not really relevant to weigh on market sentiment. That’s why traders see July 14 as the real start of the season, when Wells Fargo and JPMorgan Chase will show their results.

But it’s worth noting that within that five that already showed some results for Q2, 78 percent have beaten Earnings Per Share forecasts and 87 percent were above estimated revenues. As for Q4 and Q4, Reuters says earnings are expected to grow 8.6 and 13.1 percent respectively.

A quantitative research team of Morgan Stanley has prepared a simple graphic to help anyone interested in the earnings season understand how expectations are currently divided among different sectors of the S&P 500. Check it out:



As you can see above, big bets are on technology and financials, so far the best performing sectors of 2017.Healthcare is likely to come near breakeven as concerns the HealthCare reform are not fully extinguished yet. Utilities and Consumer Discretionary are set to move downward.

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