This Trading Week – Earnings Reports are Likely to Set the Tone
Just over half of the companies in the S&P 500 have now reported second-quarter earnings. Of these companies, 80% have surprised on the high side with actual EPS above the average estimate – 4% have reported earnings equal to the average expectations. The reporting sectors beating estimates by the most are Information Technology at 93%, and Communication Services, which beat average estimates 92% of the time. Of sectors that beat the least often, Utilities and Financials were at the bottom of the list at 67% and 70%, respectively, surpassing average estimates. These are also above 50%, supporting strong stock markets.
The weaker US dollar has helped companies with more international exposure as these have had improved year-over-year earnings above those companies with a higher percentage of domestic revenue.
The markets are likely to focus on the earnings reports this week as economic releases will be slow. Stocks may also take its cue from interest rates that have been rising for longer duration US Treasuries.
Monday 7/31
• 9:45 AM ET, The Chicago Purchasing Managers Report is expected to improve 2 points in July to a still very weak 43.5 versus 41.5 in June, which was the tenth straight month of sub-50 contraction. Readings above 50 indicate an expanding business sector.
• 10:30 AM ET, The Dallas Fed Manufacturing Survey is expected to post a 15th straight negative score, at a consensus minus 22.5 in July versus minus 23.2 in June. The Dallas Survey gives a detailed look at Texas’ manufacturing sector, how busy it is, and where it is headed. Since manufacturing is a major sector of the economy, this report can greatly influence the markets.
Tuesday 8/1
• 9:45 AM ET, the final Purchasing Managers Index (PMI) for manufacturing for July is expected to come in at 49.0, unchanged from the mid-month flash to indicate marginal contraction (above 50 indicates expansion).
• 10:00 AM ET, Construction Spending for June is expected to rise a further 0.6 percent following May’s 0.9 percent increase that benefited from a sharp jump in residential spending.
• 10:00 AM ET, JOLTS (Job Openings and Labor Turnover Survey) still strong but slowing is the consensus for June as it is expected to ease 9.650 million from 9.824 million.
Wednesday 8/2
• 10:00 AM ET, New Home Sales are expected to slow after a much higher-than-expected 763,000 annualized rate in May. Junes are expected to have slowed to 727,000.
• 10:30 AM ET, The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the US, whether produced here or abroad. The inventory level impacts prices for petroleum products.
Thursday 8/3
• 8:30 AM ET, Jobless Claims for the week ended July 30, 2023, are expected to come in at 225,000 versus 221,000 in the prior week. Claims have been moving lower in recent weeks. This is a classic case of where what might otherwise be considered worsening news (increased jobless claims) may be taken well by the market as tight labor markets are considered additive to inflation pressures.
• 8:30 AM ET, Productivity and Costs (nonfarm) is expected to rise at a 1.3 percent annualized rate in the second quarter versus 2.1 percent contraction in the first quarter. Unit labor costs, which rose 4.2 percent in the first quarter, are expected to rise to a 2.6 percent rate in the second quarter.
• 9:45 AM ET, PMI Services. Following Tuesday’s PMI Composite Final for manufacturing, which has been contracting, the Services Purchasing Managers Index is expected to indicate no change at 52.4 as the July final.
• 10:00 AM ET, Factory Orders are expected to rise 1.7 percent in June versus May’s 0.3 percent gain. Factory Orders is a leading indicator that economists and investors watch as it has been a fairly reliable indicator of future economic activity.
• 10:00 AM ET, The Institute for Supply Management (ISM) gauge is expected to have slowed to 53 from June’s 53.9 level. An ISM reading above 50 percent indicates that the services economy is generally expanding; below 50 percent indicates that it is generally declining.
• 4:30 AM ET, The Fed’s Balance Sheet is expected to have decreased by $31.208 billion to $8.243 trillion. Market participants and Fed watchers look to this weekly set of numbers to determine, among other things if the Fed is on track with its stated quantitative tightening (QT) plan.
Friday 8/4
• 8:30 AM ET, Employment Situation is expected to show that the unemployment rate unchanged at 3.6%, with a consensus for payrolls at 200,000 versus the 209,000 reported in June.
What Else
On Thursday quarterly results will be reported on Apple (AAPL) and Amazon (AMZN). The week will be the busiest one of the earnings season. About 30% of the S&P 500 will give their financial updates during the week, including Alphabet (GOOGL), Microsoft (MSFT), Meta (META), and Robinhood (HOOD). Several big pharma companies are getting ready to report, and it’s a big week for industrial companies and big oil as well.
We’re near the halfway point for Summer 2023. Have you signed up to receive Channelchek market-related news and analysis in your inbox? Now is a good time to make sure you don’t miss anything!
Managing Editor, Channelchek
Sources
https://tradingeconomics.com/calendar
