Solid earnings considering the stiff headwinds. With only about 30 S&P 500 Index companies left to report results, second quarter 2019 earnings for the index are tracking down 0.7% year over year according to FactSet, above June 30, 2019, estimates (-2.7%) despite a 1.5 percentage point drag from Boeing. Earnings estimates for the next four quarters have fallen 1.6% since June 30, reflecting tariff costs, slower global growth, and a strong U.S. dollar. Trade remains the primary focus, with nearly 30% of index constituents referencing “tariffs” on quarterly earnings calls.
Stocks rise. Global stocks are up across the board this morning amid optimistic U.S.-China trade headlines and reports that Germany is considering additional fiscal stimulus to combat economic weakness. Today’s upbeat sentiment is a reprieve from the last three weeks, in which the S&P 500 fell as much as 6% as the United States threatened more tariffs on Chinese imports and more signs of slowing emerged in global economic data. We’re in the dog days of summer, and the data flow could be light in the upcoming week, so financial markets could be bumpy as investors focus more on headlines.
Weekly Economic Calendar. In the week ahead, preliminary August Markit Purchasing Managers’ Index (PMI) data and July Conference Board Leading Economic Index data will be released Thursday. Investors will also get more Federal Reserve (Fed) commentary this week, as policymakers are scheduled to kick off the Fed’s annual Economic Policy Symposium in Jackson Hole, WY, Friday, and minutes from the Fed’s July 30-31 meeting will be released Wednesday. In global markets, Markit PMI data for international economies will be in focus.
Tweaking our forecasts. While the United States and China are expected to continue talks in September, our timetable for a potential U.S.-China agreement has been pushed out. In response, we’ve tweaked our 2019 forecasts to reflect increased risk to economic growth and corporate profits from the ongoing trade conflict between the United States and China. Check out this week’s Weekly Market Commentary: Tweaking Our Forecasts for more details, and please see our new digital version on LPL.com
Weekly Market Performance. Last week, investors endured another volatile five-day stretch as the combination of trade uncertainty, plunging global bond yields, and conflicting messages between the United States and global economies further pressured stock prices. Check out our new Weekly Market Performance report for more context on last week’s market action.
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