Stocks continued higher last week, as the S&P 500 rose by 1.50 percent to 2,801.31. That solid gain left the benchmark index up 4.78 percent year-to-date, and just 2.49 percent below the all-time closing high. One reason why many investors remain eager to participate in the market even in the face of continued trade policy uncertainty and heightened volatility is the expectation for strong corporate earnings. Indeed, the Q2 2018 earnings growth rate for the S&P 500 is projected to be 20.0 percent, according to FactSet. If true that would be a slight decline from Q1’s 24.8 percent gain but still the 2nd-highest earnings growth rate recorded since the third quarter of 2010 (+34.0 percent).
All eleven sectors are predicted to report year-over-year earnings growth, including seven sectors that are projected to report double-digit earnings growth, led by the Energy, Materials, Telecom Services, and Information Technology sectors. Earnings season has just started but 89 percent of the companies that have reported their Q2 results have beaten their average earnings per share (EPS) estimate, and 85 percent have beaten their mean sales estimate. Looking ahead, analysts project earnings growth to continue at double-digit levels through the remainder of 2018. Although encouraging, there are still many unknowns (risks) that remain in the market, meaning that volatility could stay elevated. As a result, individual investors should continue to focus less on the near-term fluctuations in stock valuations and more on the long-term goal of amassing a large retirement nest egg. Assistance is available through 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 applications rose, trade-related inflation pressures moderated, consumer credit growth accelerated, small business owner optimism remained elevated, initial jobless claims decreased, the quits rate jumped to a 17-year high, and the number of unemployed workers per job opening fell to a record low. As for the negatives, refinance applications declined, both household and wholesale inflation pressures firmed, consumer confidence cooled, and the number of job vacancies in America decreased, albeit from an all-time high. This week the pace of economic data slows down slightly but there are still a few important reports on manufacturing, housing, and consumers scheduled to be released.
**A more detailed snapshot of the U.S. economy can be found here.**
What To Watch:
- MBA Mortgage Applications 7:00 AM ET
- Housing Starts 8:30 AM ET
- Jerome Powell Speaks 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- Beige Book 2:00 PM ET
- Jobless Claims 8:30 AM ET
- Philadelphia Fed Business Outlook Survey 8:30 AM ET
- Leading Indicators 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 10-Yr TIPS Auction 1:00 PM ET
- Baker-Hughes Rig Count 1:00 PM ET
Sources: Econoday, FactSet, FRBSL
Post author: Charles Couch