Mostly positive earnings reports buoyed markets the past two weeks. Most tech giants were positive, with beats from Microsoft, Alphabet, Facebook, and Twitter. Notable misses for the past two weeks included Amazon, Netflix, and Boeing. Heavy earnings releases continue for the next two weeks before tapering off. For the week, major US equities were positive although international equities were down.
Earnings season has begun in earnest and positive surprises are outweighing the negative surprises so far. Despite the mostly positive beats, US equity markets were down over 1% for the week. Forward earnings estimates came down earlier this year, tempering expectations of corporate growth and arousing suspicion of a slowing economy. This year has also faced growing uncertainty surrounding geo-political events and central banking policies. Positive earnings would be a partial salve against these negative developments.
Check out the new MCF Weekly Capital Market Review. In this edition we recap US economic expansion and the Fed's outlook.
Last week can best be described as business as usual. The S&P 500 set a new record high last week, closing just shy of the 3,000 landmark at 2,995.82 on Wednesday July 3. Despite the soft ADP Employment Report, the US jobs report exceeded expectations by adding 224,000 jobs, far above the 72,000 recorded last month. The unemployment rate ticked up to 3.7% due to an increase in jobseekers entering the workforce pool, an indication of strong labor markets. Reports from ISM/PMI Manufacturing indices reflected what was already known: manufacturing has slowed but is still growing. The Non-Manufacturing ISM index shows that the rest of the economy is growing at a higher rate[1].
After touching an all-time high only two weeks prior, markets were flat to slightly positive last week. Despite the lackluster week, the Dow Jones Industrial Average posted its best June month since 1938 at 7.2% and the S&P 500 posted its best first half of the year since 1997 at 17.3%.
The US-China trade dispute is beginning to show signs of an eventual reconciliation as Trump announced this past Tuesday morning that he would have an extended meeting with Xi at the G20 summit June 28-29 in Osaka[1]. Teams from both sides will continue the negotiating process in the days leading up to the summit. Markets responded positively last week on this renewed optimism.