Current forecasts have S&P500 companies reporting net 18% earnings growth for the March quarter. This is well above the run of recent quarters in which numbers closer to 10% were achieved, and lauded, but the difference relates mostly to the US tax cuts. Growth ex-tax cuts will be the key to whether this season will surprise or disappoint.
The other difference between this season and seasons throughout 2017 is this time the S&P500 is not entering the period on a new all-time high valuation. Previous seasons’ results proved to be more confirmation than surprise at elevated PE multiples. Multiples have retracted to slightly more realistic levels but earnings growth forecasts are well elevated.
Wall Street is putting much stake in a strong earnings season dragging the market out of the doldrums of trade, geopolitical risk, Russia probe, White House revolving door and other concerns. Three of the big US banks report tonight, and Wall Street is holding its breath.
US economic releases next week include retail sales, housing sentiment and starts, industrial production and the Empire State and Philly Fed indices and the Fed Beige Book.
China will report its March quarter GDP next week, along with monthly industrial production, retail sales and fixed asset investment numbers.
The minutes of the April RBA meeting are out next week ahead of local March jobs numbers.
The local quarterly reporting season ramps up next week, featuring production reports from OZ Minerals ((OZL)), Whitehaven Coal ((WHC)), Rio Tinto ((RIO)), BHP Billiton ((BHP)), Evolution Mining ((EVN)) and Santos ((STO)), among others.