Monday's Market Minute: Earnings Season Kick-Off!

Citigroup C reports earnings this morning and unofficially kicks off earnings season. Financials lead the major sectors reporting quarterly results this week with a few blue chip names also in the mix. The major indices hit record levels last week, so investor expectations are bullish despite lowered estimates on the corporate side. Could this be the “Buy the rumor, sell the news” outlook for corporate results or will they outperform expectations? Historically, companies beat Wall Street analyst estimates for EPS at over a 70% clip, so we could see some upside surprises out of results.

The main driver for stocks post-earnings could be guidance moving forward into the end of the year. We saw lowered guidance negatively affect some stocks in the spring earnings season, as many sold off after positive results due to a cloudy outlook for the rest of 2019. The dovish Fed has also helped support stocks to record levels with an interest rate cut expected at the FOMC meeting at the end of the month. The S&P 500 is up over 20% in 2019 but is only up 8% from last July as the December sell-off is skewing some of the gains. Investors may need to be a bit wary into earnings, as growth rates have slowed dramatically from 2018 levels and could topple the bullish run for stocks over the next several weeks.

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