Market Update: Mon, July 29, 2019 | LPL Financial Research


Daily Insights

Good earnings season overall, with a caveat. A large loss from aerospace giant Boeing prevented S&P 500 Index earnings from improving last week as earnings season rolled on. Overall index earnings are tracking at a 2.6% year-over-year decline (source: FactSet), in line with June 30 consensus estimates. However, 77% of S&P 500 companies have beaten estimates, which is excellent, especially considering tariff costs and ongoing trade uncertainty, slowing global growth, and a strong U.S. dollar. Excluding Boeing’s results, we think the chances are good that second quarter earnings end up growing when all results are in.

Big week ahead. The week ahead will be highlighted by the Federal Reserve’s (Fed) policy meeting on Tuesday and Wednesday, with speculation that the first rate cut in 10 years is likely on tap. Economic data will be highlighted by Friday’s jobs report and the Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI) on Thursday. We’ll also get updates on personal income and spending, home prices, consumer confidence, and construction spending. On the global front, we’ll get policy decisions from the Bank of Japan on Tuesday and the Bank of England on Thursday. Investors are watching for any developments in U.S.-China trade talks, which are slated to kick off on Tuesday.

The inaugural rate cut. A Fed rate cut now would be uncharted territory for much of Wall Street, as well as the current set of Fed central bankers. Because of this, we’ve heard several questions about what we’ll see in Wednesday’s rate announcement and post-meeting press conference. In this week’s Weekly Economic Commentary, we outline our expectations for how policymakers will handle a rate cut and what looser policy could mean for future monetary policy.

Investment implications. A Fed rate cut could also have several investment implications. We have written a fair amount about the Fed’s U-turn in policy stance this year and its potential positive impact on the stock market broadly. In this week’s Weekly Market Commentary and on the LPL Research blog later today, we’ll highlight the potential beneficiaries of the transition to a new monetary policy regime for growth stocks, large caps, industrials, emerging markets, and gold.


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