Wall St. Preview: Earnings To Rule Market

Posted by: : Paul EbelingPosted on: July 22, 2013 Wall St. Preview: Earnings To Rule Market


Wall Street is having its best month since January 2013, and looks like it will extend this rally this week.

8 DJIA components and Apple (NASDAQ:AAPL) are among the companies that will report in one of the busiest weeks of the earnings season., as 157 companies in the S&P 500 index will report results.

Q-2 earnings have been above forecasts so far. Earnings for S&P 500 companies are seen rising 2.9% according to Thomson Reuters data, down from an 8.4% growth expected at the start of the year. Revenue is seen growing 1.1%.

On the week, the DJIA rose 0.5%, the S&P added 0.7% and the NAS fell 0.3% . The S&P 500 is + 18.6% on the year.

Of the 104 companies in the S&P 500 that have reported through last Friday, 65.4% posted earnings above expectations, and 51% topped revenue estimates.

Apple, the 2nd-largest US company by market capitalization, will be in the headlights to see if it can reverse the trend of weaker-than-expected tech sector earnings. The company, due to report Tuesday after the market close, is expected to show a drop of more than 21% in Quarterly profit and revenue growth of 0.2%.

The US Federal Reserve has been a Key primary driver of the market for many months. But that should change after investors were reassured that the Fed would be flexible in the timing of its withdrawal of stimulus measures and would keep interest rates ultra-low for an extended period aka QE.

Investors now bet that earnings will be the next catalyst to push stocks higher in here.

Analysts have overall been Bullish on Y 2013’s 2-H, though they have been slowly lowering estimates for the Q 3 and 4 to reflect concerns about the economy’s growth.

Per-share earnings growth is expected to be 7.8% in Q-3 and 12.4% in Q-4. That compares with a 1 July estimate of 8.5% growth and 13% growth, respectively, according to Thomson Reuters data.

With 21% of the S&P components reported, roughly 67% have beaten profit expectations, above the historical average. About 50% of the companies have topped revenue forecasts, better than the average over the past 4 Quarters.

Next week’s earnings roster includes Dow components AT&T (NYS:T), McDonald’s (NYSE:MCD) and Boeing Co (NYSE:BA). Ford Motor Co (NYSE:F), Visa (NYSE:V) and United Parcel Service (NYSE:UPS) are also due. UPS, which is seen as a proxy for business activity, recently cut its outlook, due to a weak US economy and overcapacity in the global air freight market.

Economic indicators this week include sales of new and existing homes. Sentiment among builders remains Bullish, though housing starts and permits for future homes hit a 10-month low in June.

June existing-home sales, which are due Monday, are seen rising 0.6% compared with a 4.2% rise last month. New-home sales for June are also seen rising, according to Thomson Reuters estimates.


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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

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