First Quarter Recap & Earnings Expectations – Monday Morning Market Memo – April 1, 2019

Good morning,

The Standard & Poor’s 500 Index finished the first quarter of the year with a gain of 13.1%, its best quarterly performance in almost a decade. The Dow Jones Industrial Average rose 11.2% for the quarter, while the NASDAQ Composite jumped 16.5%. Two major factors driving the strong quarterly performance were the Federal Reserve Bank’s reversal of policy to an accommodative (easy) stance along with optimism over a trade deal being reached between the world’s two largest economies, the United States and China. Also, stocks suffered a steep decline at the end of last year, resulting in what we believe were oversold conditions – and setting the stage for a rally. Whether the rally continues or not, will depend in part on economic data and corporate earnings.

A large batch of data is due out in the week ahead, including Retail Sales, Auto Sales, Construction Spending, the ISM Manufacturing Index, Durable Goods Orders, and the big report of the week the March Jobs Report on Friday. Expectations are for Nonfarm Payrolls to increase by 175,000 and for the unemployment rate to hold steady at 3.8%. Also ahead of us, is another Earnings Season! Although we’re not sure if this one is worthy of an exclamation mark.

The market is expecting earnings growth for the first quarter of the year to be negative – according to data from FactSet, the estimated earnings decline for the S&P 500 is -3.9%. Remember, the market does not usually move very much in either direction based upon expected events, and the market is a forward looking mechanism. Expectations are for an earnings decline, so the market will not be surprised by negative numbers. Investors are looking ahead until later this year when they are anticipating stronger economic growth and better corporate earnings!

All the best,

Southport Station Financial Management, LLC