Into Earnings Season! – Monday Morning Market Memo – July 17, 2023

Into Earnings Season! – Monday Morning Market Memo – July 17, 2023

Earnings Season kicked off last week, highlighted by reports from several big banks.  JPMorgan ChaseWells Fargo, and Citigroupall reported better-than-expected top and bottom-line numbers (but the reaction in their stock prices were mixed/muted).  Away from financials, UnitedHealth Group caught the markets attention with a healthy report – shares rallied over 7% after the company beat on earnings and raised full-year guidance.


Earnings action really heats up this week.  Major companies scheduled to report include Bank of AmericaMorgan StanleyGoldman Sachs, International Business MachinesNetflixTesla, United Airlines HoldingsJohnson & JohnsonIntuitive Surgical,Halliburton, and American Express.  Overall, investors are not expecting much from corporate earnings this time around.


According to FactSet: For the second quarter of 2023, the blended earnings decline for the S&P 500 is -7.1%.  If 7.1% is the actual decline for the quarter, it will mark the largest earnings decline reported by the index since the second quarter of 2020.  The good news for the stock market is that when expectations are low, it is easier to impress, (or at least not disappoint).


Recapping the market action from last week – all three major stock market indices posted solid gains.  The Dow Jones Industrial Averageincreased 2.3% to 34,509 – the Standard & Poor’s 500 Index added 2.4% to 4,505 – while the NASDAQ Composite jumped 3.3% to 14,114.  The rally was fueled by cooler-than-expected inflation data, with both the CPI (Consumer Price Index) and PPI (Producer Price Index) coming in lower than forecast.  Additionally, financial markets believe we are near the end of the Federal Reserve’s rate hiking cycle.


Probabilities are 97.3% the Federal Reserve will raise rates ¼ percentage point at next week’s policy meeting, according to the CME FedWatch Tool.  The debate is ongoing whether there will be another hike at the September meeting, with more inflation and employment data to come in the interim.  Bottom line, however, markets are under the belief (which we agree with), that the Fed is close to being done raising interest rates.  This has been creating positive sentiment and upward momentum for the stock market!


As always, don’t hesitate to contact us with any questions or if you would like to set up a meeting.


All the best – Southport Station Financial Management, LLC