Potential Market Movers
Reviewing the Market Minutes
Three Things to Watch
Revisions Go Global: Net earnings revisions are negative around the world, according to Yardeni Research. The three-month moving average of forward earnings revisions for the All Country World MSCI Index shows net negative revisions for Q2 going through the end of May. This represents two consecutive quarters of net negative revisions. When excluding U.S. stocks, the revisions are even more negative.
The net earnings revisions for the S&P 500 have fallen dramatically since 2021 but remain net positive. Additionally, the S&P 500 saw an increase in net revisions from April to May. Similarly, Europe has also seen a dramatic decrease in net revisions but remains positive despite slipping into the negative in April.
Around the Corner: The unofficial kickoff of the Q2 earnings season will start the week of July 11 with several large banks reporting. According to FactSet, the estimated Q2 earnings growth for the S&P 500 is 4.3%–the lowest growth rate since Q4 of 2020. Between March 31 and June 15, the estimated growth rate fell from 5.9% to 4.3% due to analysts’ revisions. FactSet reports that 72 of the S&P 500 companies have issued negative earnings guidance against 31 issuing positive.
Meanwhile in Europe: Earnings season in Europe works a little differently as reports from various countries trickle in on an extended schedule. Data tracked by Refinitiv found that European companies making up the STOXX Europe 600 are expected to grow 42% from Q1 2021, but growth narrows to only 22.9% when energy companies are excluded. Of the 600 companies, 273 have reported earnings and 66.3% of them have beat earnings estimates— well above the historical average of 52%. Meanwhile, 325 of the STOXX 600 companies have reported revenues with 77.2% beating analyst estimates. This is also above the historical average of 57%.
The highest growth rates were in energy with consumer cyclicals and basic materials a distant second and third. Looking at growth rates by country, Norway, Austria, France, and Netherlands were the highest. Firms in energy and consumer cyclicals reported the highest number of positive earnings revisions for the quarter.
Overall, the STOXX 600 index has fallen nearly 18% year-to-date because many European countries took longer to reopen from the pandemic, are dealing with high inflation rates, and some countries are seeing higher yields even though the European Central Bank hasn’t raised rates yet.
Notable Calendar Items
June 27: Durable Goods Orders, pending home sales, and earnings from Nike (NKE)
June 28: CB Consumer Confidence
June 29: Gross domestic product (GDP) and earnings from Paychex and (PAYX) General Mills (GIS)
June 30: Initial Jobless Claims, PCE inflation, Chicago PMI, and earnings from Walgreens Boots (WBA), Micron (MU), and Constellation Brands (STZ)
July 1: ISM Manufacturing PMI
TD Ameritrade® commentary for educational purposes only. Member SIPC.
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