The Week in Review
Markets ended another volatile week mixed, pummeled by concerns about global growth but buoyed by better-than-expected earnings results. For the week, the S&P 500 ended flat, the Dow lost 0.82%, and the Nasdaq gained 0.39%.1
As of last Friday, just under half the S&P 500 companies had reported earnings, and the vast majority (69% and 63%, respectively) had beaten both earnings and revenue expectations.2 Though there were some high profile-earnings misses, the overall picture seems to be one of redemption and resilience. The percentage of better-than-expected results are up from the first quarter, meaning company growth likely accelerated; it’s also a good sign for future expectations, given that the economy is doing much better overall than it did earlier in the year.
That being said, some red flags about economic growth were raised last week. Mixed business spending data – a core component of Gross Domestic Product (GDP) calculations – may erode Q2 economic growth. While businesses spent more on core capital goods like computer equipment and automobiles, the value of shipments declined for the third month in a row, which led the International Monetary Fund to cut its 2014 U.S. growth forecast.3 On the other hand, durable goods inventories rose 0.4%, which is a great improvement over the slow inventory growth that contributed to the Q1 economic contraction.4 We’ll know more after this week’s official GDP report.
Busy Earnings Week
The week ahead may be the busiest of the summer, with over 140 S&P 500 companies releasing earnings.5 The Federal Reserve Open Market Committee meets on Tuesday and Wednesday to ponder next steps in monetary policy. Will they announce another $10 million taper to bond purchases? Probably. But, their comments will tell us a lot about how they feel about the economy.
The economic calendar is also full of major reports. Traders will get their first look at official Q2 GDP numbers on Wednesday as well as the July Employment Situation report on Friday. Given global worries about economic growth, we can expect some volatility as traders hedge their bets ahead of the data.
1 http://bit.ly/1nOrN4G
2 http://www.cnbc.com/id/101867227
3 http://abcn.ws/UGINwv
4 http://reut.rs/1rRj29a
5 http://www.cnbc.com/id/101868173
6 http://reut.rs/1oCcQBN
7 http://www.cnbc.com/id/101863962
8 http://www.cnbc.com/id/101867062
9 http://reut.rs/1rAKHgS
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