Stocks Ended Lower, Earnings Season Winding Down, Eyes On The Middle EastStocks closed moderately lower yesterday to start the week. This comes on the heels of last week's up-week for most of the indexes, and new highs by the S&P 500 and the small-cap Russell 2000. Big earnings have been the key driver over the last several weeks. The latest better-than-expected CPI (retail) and PPI (wholesale) inflation reports last week also helped. Earnings season continues this week with another 93 companies on deck to report today, including Home Depot before the open, and Toll Brothers and Keysight Technologies after the close, to name a few. Between today and the rest of the week, we’ll hear from another 265 companies. Earnings season will 'officially' come to a close next week when NVIDIA reports on Wednesday, 8/26 after the close. But what an earnings season it's been so far. With more than 90% of the S&P 500 companies having already reported Q2 results, aggregate earnings are up 41.6% vs. this time last year, and are on pace to be up 43.3% when earnings season is over. And stocks have soared as a result. Not overly surprising as stocks typically go up during earnings season. And we saw that once again this earnings season. In other news, yesterday's Empire State Manufacturing Index improved to 20.6 vs. last month's 15.6 and views for 10.0. The Housing Market also ticked up to 35 vs. last month's 34 and estimates for 33. Today we'll get the Housing Starts and Permits Report, the Pending Homes Sales Index, Import and Export Prices, Industrial Production, and E-Commerce Retail Sales. Busy day of economic reports out today. But investors are probably more interested in tomorrow's FOMC Minutes from the Fed's last meeting on July 28-29. We know that the Fed has been hinting at a possible rate hike if inflation were to climb higher. Gladly, inflation has been easing. Granted, last week's reports came out after the Fed's last meeting. But it was also easing prior to that. So it will be interesting to see if there’s any deeper insight on what the Fed policymakers were thinking at their last outing.
Although, the Minutes are in the rearview mirror. So the next meeting will be more important than tomorrow's lookback. Nonetheless, it presents a snapshot into their thought process at that point in time, and could inform their outlook at the next meeting. The market will also be watching the headlines for any news out of the Middle East. The ceasefire between the U.S. and Iran officially expired yesterday. While there were no reported attacks on tankers in the Strait of Hormuz yesterday, there were attacks in the Red Sea and the Bab el-Mandeb corridor yesterday, as the Iran-backed Houthis launched missiles at a Saudi-backed military ship and escort boats.
Separately, President Trump said the U.S. would bomb Oman if they got in the way of negotiations to open the Strait of Hormuz. So tensions remain high, while shipping thru that strategic waterway has fallen, all while oil prices remain elevated. In the meantime, stocks remain near record highs. And with a little more than 4 months left, I'm still expecting a lot more upside to go by year's end. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research |
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