Stocks edged lower last week, as the S&P 500 fell by 0.13 percent to 2,578.85. That small loss still left the benchmark index up a solid 15.19 percent year-to-date, and just 0.60 percent below the all-time closing high. Volatility has picked up recently due to uncertainty about tax reform but investors continue to step in and treat every dip as a buying opportunity. One reason for such confidence in the market is the third quarter corporate earnings season. Indeed, of the 95 percent of companies in the S&P 500 that have reported their Q3 results, 74 percent have beat their average earnings per share (EPS) estimate, according to new FactSet data, and 66 percent have beat their mean sales estimate. Both of those figures are above the 5-year average, and profit growth has been led by the energy, information technology, and materials sectors.
Only three sectors have reported a year-over-year decline in earnings, led by the financials sector. Looking ahead, 61 companies in the S&P 500 have issued negative EPS guidance for Q4 2017, and 32 companies have issued positive EPS guidance. However, the percentage of companies issuing negative EPS guidance is 66 percent, well below the 5-year average of 74 percent. Moreover, companies are currently reporting earnings growth of 6.2 percent but analysts expect this to rebound to double-digit levels over the next few quarters. Although encouraging, retirement investors should still focus less on near-term market fluctuations and more on the long-term goal of amassing significant wealth. Assistance with that endeavor 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 and refinance applications rose, housing starts surged, building permits lifted, homebuilder sentiment improved, industrial production jumped, capacity utilization increased, and small business owner confidence rebounded. As for the negatives, gauges of regional manufacturing activity deteriorated, retail sales growth cooled, initial jobless claims lifted to the highest reading since September, and both wholesale and household inflation pressures in American continued to rise. This holiday-shortened week the pace of economic data slows down considerably but there are still a few important reports on housing, manufacturing, and employment scheduled to be released, along with the potentially market-moving minutes from the latest Federal Open Market Committee (FOMC) meeting due out on Wednesday.
**A more detailed snapshot of the U.S. economy can be found here.**
What To Watch:
- Leading Indicators 10:00 AM ET
- MBA Mortgage Applications 7:00 AM ET
- Durable Goods Orders 8:30 AM ET
- Jobless Claims 8:30 AM ET
- Bloomberg Consumer Comfort Index 9:45 AM ET
- Consumer Sentiment 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- EIA Natural Gas Report 12:00 PM ET
- FOMC Minutes 2:00 PM ET
- Markets Closed
Sources: Econoday, FactSet, FRBSL
Post author: Charles Couch