The second quarter US reporting season peaks this week with one of the largest number of S&P 500 companies releasing their results and by the close of business Friday we will have a very good idea how corporate America has performed in what is expected to be another weak quarter of economic growth.
Even though tech giants, Apple and Facebook do not report until next week, Alphabet, Microsoft, Intel, Texas Instruments and Amazon all report this week and will set the tone for the season – they plus Apple and Facebook have been among the strongest performers in recent months.
As well as the earnings rush, investors will have to contend with the fall out from the French presidential election first round, a major statement on tax midweek from President Trump, and the deadline of Friday to lift the US government’s debt ceiling, or see a shut down of government.
Friday also sees the release of the first estimate of first quarter GDP growth for the US and it is very possible the figure will be sharply less than the 2.1% annual rate seen in the third and final estimate for the 4th quarter of 2016. Some US economists say growth could be as low as 1% (annual) in the first estimate).
Forecasts for the quarter’s profit growth have been edging higher and they are now to be the strongest quarterly earnings growth in more than five years.
Only 76 S&P 500 companies reported last week compared with 134 in the comparable week in 2016, according to S&P Capital.
More than 190 members of the S&P 500 index will release quarterly figures this week, up 15% from the same week a year ago and according to Reuters one of the largest weekly reporting schedules for more than a decade.
The companies reporting accounts for around 40% of the S&P 500’s value, or more than $US7.7 trillion, and includes big names like Google’s parent Alphabet Inc, Amazon, Microsoft Corp, Exxon Mobil, Schlumberger, Halliburton, McDonalds. 3M, Procter and Gamble, Coca Cola, Pepsi, Boeing, General Dynamics, DuPont, Dow Chemicals, Lockheed, AT&T and Comcast.
The S&P 500 is up 10% since Donald Trump’s victory over Hillary Clinton in the November 8 poll, and the tax announcement could very well keep that optimism going.
But from slowing car sales, a sharp downturn in activity in manufacturing to a 7 month low in the latest survey on Friday, weak retail sales growth and less than encouraging housing data, it is clear the US economy is becalmed somewhat compared to the 3% plus growth seen in the third quarter of last year.
So far this quarter we have seen solid earnings, especially for the banks (with the exception of Goldman Sachs), while manufacturing has been spotty – that will be tested again this week with figures from Ford, Honeywell, Boeing and Lockheed.
Thursday will be the busiest day with nearly 70 companies reporting, including updates after the trading from Alphabet (google), Procter and Gamble, Ford, Boeing, Amazon, Intel Corp, Microsoft and Starbucks Corp.
Friday is also the final trading day of April, which usually means a more active day for the market. But that deadline for the debt ceiling could still be unresolved, which could trigger a sell off on fears the government will have to shut down.
