Market Update: Monday, July 23, 2018

MacroView_header

Daily Insights

  • Another quarter of 20% earnings growth is likely on tap. Consensus estimates are calling for a 21% year-over-year increase in S&P 500 Index earnings for the quarter, setting up a second-straight quarter of 20%+ growth. Should results come in ahead of expectations as we expect, it would mark the 37th consecutive quarter of earnings exceeding expectations. Tax cuts, strong manufacturing activity, a weaker U.S. dollar (versus the year-ago quarter) and higher oil prices all point to strong results, as we discuss in today’s Weekly Market Commentary. While tariffs have dominated headlines, we do not expect trade to have much impact on overall results. With 87 S&P 500 companies having reported, the season is off to a good start: 84% of companies have exceeded earnings estimates.

  • As always, guidance is key. During earnings season we will be closely following companies’ guidance and movement in analysts’ earnings estimates. In our recently released Midyear Outlook 2018: The Plot Thickens, we increased our S&P 500 earnings forecast for 2018-from $152.50 per share to $155, an almost 18% year-over-year increase over 2017. The increase was driven primarily by strong first quarter results, but economic data received during the second quarter pointed to an even stronger backdrop for corporate profits than we had anticipated. While our $155 per share forecast is below the consensus estimates of $160, we prefer to be conservative due to the potential for further U.S. dollar strength, wage pressures, and tariff-related costs.

  • GDP report highlights the week of data. Bloomberg consensus gross domestic product (GDP) forecast has risen to 4.2% for the second quarter. Markit’s global purchasing manager’s indexes, the European Central Bank meeting, and trade talks (NAFTA and European Commission) are also scheduled this week, in addition to the busiest week of second quarter earnings season with 175 S&P 500 companies scheduled to report. View all the key events on our Weekly Global Economic & Policy Calendar.

  • GDP preview. Consensus expectations show that Friday’s first look at real GDP for the second quarter could be the strongest reading since 2014. On today’s blog (and this week’s Weekly Economic Commentary), we examine the catalysts behind last quarter’s economic growth activity, including the benefits of fiscal stimulus and a jump in exports.

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Monday

Tuesday

  • FHFA House Price Index MoM (May)
  • Markit Mfg PMI (Jul)
  • Markit Svcs PMI (Jul)
  • France: Markit Mfg PMI (Jul)
  • France: Markit Svcs PMI (Jul)
  • Germany: Markit Mfg PMI (Jul)
  • Germany: Markit Svc PMI (Jul)
  • Eurozone: Markit Mfg PMI (Jul)
  • Eurozone: Markit Svcs PMI (Jul)
  • Japan: Leading Index (May)

Wednesday

  • New Home Sales (Jun)
  • France: PPI (Jun)
  • Eurozone: M3 Money Supply (Jun)
  • Japan: PPI Svcs YoY(Jun)
  • South Korea: GDP (Q2)

Thursday

Friday

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All performance referenced is historical and is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured.  These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency.  The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Index data obtained via FactSet

Member FINRA/SIPC

For Public Use – Tracking # 1- 752306 (Exp. 7/19)