Stocks edged lower last week, with the S&P 500 falling by 0.35 percent to 2,390.90. That was the first weekly decline for the benchmark index in a month but the small loss still left the S&P 500 up a healthy 6.79 percent year-to-date, and just 0.36 percent below the all-time closing high. The relatively modest pullback also highlighted the continued resiliency of U.S. equities amid the uncertainty surrounding the recent financial developments in China and President Donald Trump’s sudden firing of FBI director James Comey. One factor that has likely helped keep major stock indices near record levels is the corporate earnings season for the first quarter of 2017. Indeed, as of last Friday, 91 percent of the companies listed in the S&P 500 have reported their profit results for Q1. Seventy-five percent of these firms have beat their average earnings per share (EPS) estimate, according to FactSet, and 64 percent have beat their mean sales estimate.
Moreover, the blended earnings growth rate for the S&P 500 now sits at 13.6 percent. If that holds for the rest of earnings season it will be the highest (year-over-year) earnings growth for the index recorded since Q3 2011, and the first time the index has seen double-digit earnings growth since Q4 2011. Looking ahead, 61 S&P 500 companies have issued negative EPS guidance for the second quarter of 2017, while only 29 firms have issued positive EPS guidance. At first glance that might seem disappointing but the percentage of companies issuing negative EPS guidance is actually below the 5-year average currently, and most analysts expect earnings growth to continue for the remainder of 2017. More importantly, retirement investors should focus less on the near-term fluctuations in stock valuations and more on the long-term goal of amassing significant wealth. Such efforts can be enhanced with the consistent use of tax-advantaged savings vehicles, dollar-cost averaging, and regularly consulting with a professional financial advisor. As always, we are here to help with any questions you may have.
To recap a few of the things we learned about the economy last week, the positives included that mortgage and refinance applications rose, retail sales growth rebounded, consumer sentiment improved, total job openings in America lifted to an 8-month high, the number of unemployed Americans per job opening fell, and initial jobless claims slid to one of the lowest levels on record. As for the negatives, U.S. wholesalers’ average inventory-to-sales ratio remained elevated, small business owner optimism cooled, and several measures of consumer, producer, and trade-related inflation pressures in this country firmed. This week the pace of economic data slows down considerably but there are still a few important reports on manufacturing, housing, and employment scheduled to be released.
**A more detailed snapshot of the U.S. economy can be found here.**
What To Watch:
- Jobless Claims 8:30 AM ET
- Philadelphia Fed Business Outlook Survey 8:30 AM ET
- Bloomberg Consumer Comfort Index 9:45 AM ET
- Leading Indicators 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 10-Yr TIPS Auction 1:00 PM ET
- Loretta Mester Speaks 1:15 PM ET
Sources: Econoday, Bloomberg, Twitter, FactSet, FRBSL
Post author: Charles Couch