Earnings Key Driver for the S&P 500 This Week
17 Julho 2022 - 6:18PM
Finscreener.org
In the week ended on July 15,
equity markets remained volatile due to red-hot inflation data that
stood at 9.1% for June, compared to estimates of 8.8%. This
triggered the possibility of the Federal Reserve raising interest
rates by 100 basis points later this month.
Despite sharp gains on Friday,
the S&P 500 index lost 1% in the last week. Higher commodity
prices have compelled the Fed to increase interest rates despite
the threat of an upcoming recession. However, comments from Fed
officials and a 1% gain in retail sales for June, as well as
better-than-expected consumer inflation data estimates may have
reversed expectations in the futures market.
In an interview with CNBC, Art
Hogan, chief market strategist at National Securities, stated, “It
really was a great study in mob psychology. We went into the week
with a 92% chance it was a 75 basis point hike, and we exited
Wednesday with an 82% chance it was going to be 100 basis points.”
On Friday, there was just a 20% chance for a 100-basis point hike
in July.
The most significant catalyst for
the S&P 500 in the next week is the upcoming earnings
season.
Big banks, including
Bank of America (NYSE:
BAC) and
Goldman Sachs (NYSE:
GS), will report earnings on Monday. On Tuesday,
large-cap heavyweights such as Netflix
(NASDAQ: NFLX), Johnson & Johnson
(NYSE:
JNJ), and Lockheed Martin
(NYSE:
LMT) will report Q2 results on Tuesday. Other
note-able companies reporting quarterly results include
AT&T (NYSE: T), Union Pacific
(NYSE:
UNP), and
Travelers (NYSE:
TRV).
In addition to earnings,
macroeconomic data around housing will be released as well. While
housing starts will be released on Tuesday, existing home sales are
expected on Wednesday. Further, manufacturing and services PMI data
will be released on Friday.
Quincy Krosby, the chief
financial strategist at LPL Financial emphasized, “Every data point
matters and also what companies are saying. Next week... it’s a
much broader picture in terms of earnings and the economy.If there
are negative revisions and mounting concerns from the guidance, I
think then you are going to see questions as to how the Fed is
going to interpret that…The other point is whether or not the
market can build off today’s rally.”
What should investors expect from the S&P 500 in
Q2?
Market experts expect the Q2
earnings season will disappoint investors resulting in downward
revisions due to issues such as supply chain disruptions,
inflation, and many others. According to Refinitiv data, earnings
for S&P 500 companies might rise by 5.6% on average,
year-over-year. Around 35 companies part of the S&P 500 have
reported earnings as of Friday morning, 80% of which beat consensus
earnings estimates.
Historically, 65% of these
companies beat earnings estimates. It will be interesting to see if
this number falls lower in Q2 of 2022. Consumer giant
Pepsi (NASDAQ: PEP) reported
its quarterly results and maintained its guidance for 2022, and
this development was cheered by investors.
In addition to Q2 results,
investors will also be watching to see how rising mortgage rates
will impact housing data.
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