Amazon is just one of the bigger names reporting earnings later this week. (Photo by Smith … [+]
Key Takeaways
- Big Week For Earnings
- FOMC Meeting Wednesday
- Tesla Shares On The Rise
After consecutive weeks of losses, both the S&P 500 and Nasdaq Composite posted healthy gains last week. On Friday, the S&P gained 1%, closing the week higher by 2.6%. The Nasdaq Composite was higher by 2% on Friday and 4% for the week. Strong earnings were the catalyst and I’m interested in seeing if that narrative continues this week.
According to FactSet, 46% of the companies in the S&P 500 have reported earnings, with 77% beating estimates. Based on companies who have already reported and estimates for those that have yet to report, first quarter earnings are on pace to be up 3.5% as of Friday’s close. The magnitude of earnings growth has led to the forward 12-month P/E ratio in the S&P 500 to come down some. Back in March, that ratio was 21. Today, the ratio is 20. While that is still above its five-year and ten-year average of 19.1 and 17.8, respectively, it’s getting back to being in line with historical fundamentals.
Earnings season continues this week with 1/3rd of the S&P 500 reporting. We have a number of big names spaced out through the week. Some of the highlights include: Advanced Micro Devices
Advanced Micro Devices
Amazon
Apple
Mastercard
In addition to earnings, it’s a heavy week for economic data. Most of the data begins Wednesday with ISM and JOLTs. However, Wednesday’s highlight is the Federal Reserve Open Market Committee (FOMC) meeting. It’s a foregone conclusion that the Fed will leave rates alone when they meet, therefore, I’m much more interested in hearing what Jerome Powell has to say about future monetary policy. According to the CME Fed Watch tool, the chances of a rate cut prior to September are unlikely.
Coming into 2024, investors were expecting multiple interest rate cuts. However, stubbornly elevated levels of inflation have continually pushed that possibility off. While that may sound like bad news for markets, it’s not. As seen by earnings so far, the economy is strong and producing strong results. It’s expected this week’s jobs report will show 210 thousand new jobs were created in April and the unemployment rate is just 3.8%. In fact, at this point, a rate cut would likely be seen as a sign the economy is weakening. Therefore, I believe we’re in a “no news is good news” situation with respect to interest rates.
For today, I wouldn’t be surprised if trading is relatively quiet. Of the companies reporting earnings before or after the close today, none are really what I would consider to be household names. And while the economic calendar this week is filled, we don’t begin getting anything of importance until tomorrow. Two stocks that don’t have earnings but are moving this morning are Tesla
Tesla
Looking forward to the rest of the week, with all the data scheduled, it could make for choppy trading. Last week we saw just how quickly markets can move and the potential magnitude of those moves. It was a reminder why traders keep their position sizes small. Headed into today, the expected move in the S&P 500 for the week is seventy-six points. That is roughly in line with what we saw last week as well. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
