Asset Management
04/17/2023 Market Strategy
April 17, 2023
Turning Lemons into Lemonade
Three of the big US banks that reported Q1 earnings last week surprised to the upside
Key Takeaways
- Stocks edged higher last week on positive earnings surprises. This week a broader array of companies and sectors reporting should provide additional clarity to the direction that earnings season will take in the weeks ahead. This week another 61 companies are scheduled to report results.
- Beyond earnings season news developing in M&A in health care and energy points to improved sentiment within the market.
- Last week’s economic data and the direction of the markets suggest that the Fed’s actions are on the right track to curbing the pace of inflation even as the economy remains remarkably resilient.
Earnings results as well as guidance from several bellwether stocks among the sectors in the S&P 500 last week gave a boost to investor sentiment and added some lift to the equity benchmarks for the week. Earnings reported at the big banks (six financial sector firms reported last week) rose by 26.41% as revenues grew 17.9%.
We’ve Only Just Begun
Looking to this week and beyond risks remain tied to monetary policy, geopolitics, domestic and global economics―along with the potential for idiosyncratic risk (individual company risk) across the sectors with some 94% of the S&P 500’s companies scheduled to report over the next few weeks.
This week some 61 additional firms in the S&P 500 are scheduled to report, including more financial firms as well as other widely followed names belonging to the technology, industrials, and consumer discretionary sectors. Another 182 firms from across the S&P 500’s sectors are scheduled to report the week of April 24.
With only 28 or 6% of the firms in the S&P 500 index having reported first-quarter earnings through last Friday earnings it’s too early to determine the outcome of how earnings season will end. That said, so far Q1 earnings for the S&P 500 per Bloomberg are up some 7.76% on back of 10.88% revenue growth.
Last week’s economic data pointed to the Federal Reserve’s actions having further success at bringing the pace of inflation lower and toward a more manageable level.
With four of the information technology sector’s 66 companies having reported, earnings for the sector are off 46% from a year earlier on back of a 2.2% decline in revenue.
Among consumer discretionary firms, with five of 53 companies in the sector having reported earnings for Q4, earnings are up 110.5% YoY on back of revenue growth of 10.4%.
In the Industrials sector, with five of 73 companies in the sector having reported thus far, earnings are up 50.2% on back of 7.5% revenue growth.
Beyond earnings season economic data and news developing on the M&A front (with two potential mergers of size in health care and energy in the financial headlines last week) should be grabbing traders’ and investors’ attention this week.
In the domestic political arena look for the US debt ceiling to gain investor attention as the pages on the calendar turn. So far a lot of talk and not much action to speak of in Washington has kept this item important to Wall Street, Main Street and the world off the front burner. Tempus fugit.
Last week’s economic data pointed to the Federal Reserve’s actions having further success at bringing the pace of inflation lower and toward a more manageable level. In addition economic data continued to show some slowing even as the economy continues to show enough resilience to keep bulls and bears on their toes as they ponder the data crossing the transom on a day to day basis.
From our perch on the market radar screen the potential for things to get better even as uncertainty and risk persist on the landscape continues. The resilience reflected in the economy in our view points to the potential for stocks to persist climbing the proverbial “wall of worry” if not in a straight line higher
Name:
John Stoltzfus
Title:Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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