Earnings continue gradual improvement. With 90% of S&P 500 Index companies’ results in, second quarter 2019 earnings are tracking down -0.7% year over year, above June 30 estimates of -2.7% despite a more than 1 percentage point drag from Boeing and a modest improvement over the prior week. Forward earnings estimates have fallen by 1.5% since June 30, roughly in line with recent trends and reflecting tariff costs, slower global growth, and a 1 to 2 percentage point drag from a strong dollar. While management teams’ overall tone has been okay, tariff and trade mentions on earnings conference calls have increased.
Stocks slide. Global stocks are down modestly this morning amid escalating political tensions in Hong Kong and fragile sentiment in financial markets. While Hong Kong protests are unnerving, we don’t think they will have a material impact on the U.S. economic outlook. However, that situation adds to already high global uncertainty, which has rattled markets recently.
New Weekly Market Performance report. We are pleased to share our new Weekly Market Performance report with insights on major asset classes. U.S. stocks struggled last week after China retaliated against new tariff threats by devaluing the yuan, and several central banks cut interest rates, boosting the U.S. dollar and putting pressure on the Federal Reserve (Fed) to loosen policy more. Check out our new Weekly Market Performance report for more details on last week’s market action.
The new (ab)normal. Recent volatility has been jarring after a period of relative calm and a series of new highs. However, it’s important to remember that stock market volatility has been about average in 2019, and the S&P 500 Index is still up about 16% year to date (through the end of last week). We’ll provide more perspective on the recent selloff in this week’s Weekly Market Commentary: The New (Ab)normal.
Weekly Economic Calendar. Second quarter earnings season is winding down, and this week’s economic slate is light, so markets may be more sensitive to trade and geopolitical developments. In the United States, July Consumer Price Index (CPI) data comes out August 13, and retail sales data will be released August 15. Internationally, investors will get their first look at second-quarter Eurozone and Germany gross domestic product (GDP) prints August 14.
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