NEW YORK: Forget about French elections or the flagging Trump trade. Corporate America is set to unleash its biggest profit-reporting feast in at least a decade next week, with more than 190 members of the S&P 500 index delivering quarterly scorecards, according to S&P Dow Jones Indices data. The lineup accounts for around 40 per cent of the benchmark index’s value, or more than $7.7 trillion, and includes big names like Google’s parent Alphabet Inc, Amazon.com Inc, Microsoft Corp and Exxon Mobil Corp.
The onslaught could keep US stock investors’ focus largely on earnings next week even as the world’s attention is likely to be drawn elsewhere.
“That would be our hope,” said Joe Zidle, portfolio strategist at Richard Bernstein Advisors in New York.
“A lot of people looked at this market and said it was the result of the Trump bump or the Hillary relief rally,” while earnings have been rebounding, he said. “The faster earnings growth is under-appreciated by investors.”
Many strategists have attributed the 10 per cent rally in the S&P 500 since Donald Trump’s victory over Hillary Clinton in the November 8 US presidential election to optimism Trump would boost the domestic economy through tax cuts and an infrastructure spending binge.
The gains drove market valuations recently to their highest since 2004, even with little progress in Washington on the fiscal policy front. Meanwhile, other anxiety-provoking events have grabbed headlines, including unsettling relations with North Korea and this weekend’s election in France, which has a bearing on the country’s membership in the European Union and its currency, the euro.
Upbeat earnings from Morgan Stanley and other banks so far this reporting period cushioned those geopolitical worries, helping push the S&P 500 up 0.9 per cent this week, its best such performance in two months. Shares of smaller companies did even better, with S&P’s benchmark indexes for small and mid-cap stocks notching their best weeks of 2017, with gains of between 2 per cent and 3 per cent.
Expectations for the quarter’s profit growth have risen as well, and the first three months of the year now appear set to mark the strongest quarterly earnings growth in more than five years. In the last week alone, expected S&P 500 first-quarter earnings per share growth rose to 11.2 per cent from 10.4 per cent, a more than 7 per cent jump, according to Thomson Reuters data.
“This week definitely has proven that the Street likes earnings — it’s controllable, it’s US,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
The reason for the slew of reports next week is anyone’s guess, Silverblatt said, although recent holidays possibly played a role. Passover, Good Friday and Easter all fell in the previous weeks, which may have prompted some companies that typically report earlier to delay a week.
Just 76 companies reported this week compared with 134 in the comparable week a year ago, Silverblatt said. Next week’s rush will represent a 15 per cent increase from the 166 S&P constituents that reported in the comparable week last year.
Thursday will be the busiest day with nearly 70 reports due, including updates after the closing bell from Alphabet, Amazon, Intel Corp, Microsoft and Starbucks Corp.
That could make for a bang in the market on Friday, Silverblatt said, which is also the final trading day of April.
US STOCKS: US stocks dipped on Friday as investors were cautious ahead of the first round of the closely contested French presidential election, but the S&P 500 managed to notch its first weekly gain in three.
The first round of France’s presidential election may be too close to call when polls close on Sunday because initial projections will not be available as early as in the past, pollsters and their watchdog said.
Most polls see centrist Emmanuel Macron and far-right leader Marine Le Pen qualifying on Sunday for a May 7 runoff, but conservative Francois Fillon and leftist Jean-Luc Melenchon are not far behind and within the margin of error.
“Nobody is taking anything for granted after the big swing and miss in Britain and the big swing and a miss here,” said Jack Ablin, Chief Investment Officer at BMO Private Bank in Chicago. “I don’t think anyone wants to stick their neck out for this one.”
US President Donald Trump said he would have a major tax reform announcement on Wednesday.
The Dow Jones Industrial Average fell 30.95 points, or 0.15 per cent, to 20,547.76, the S&P 500 lost 7.15 points, or 0.30 per cent, to 2,348.69 and the Nasdaq Composite dropped 6.26 points, or 0.11 per cent, to 5,910.52.
The Dow rose 0.5 per cent, the S&P gained 0.8 per cent and the Nasdaq advanced 1.8 per cent in what was the first weekly gain for the top indexes over the last three weeks. — Reuters
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