THE WEEK ON WALL STREET
Stocks rallied last week as investor spirits lifted thanks to a better-than-expected start to the
second-quarter earnings season. The Dow Jones Industrial Average gained 1.95%, while the
Standard & Poor’s 500 added 2.55%. The Nasdaq Composite index jumped 3.33% for the week.
The MSCI EAFE index, which tracks developed overseas stock markets, advanced 3.54%.
EARNINGS PROPEL STOCKS
Earnings season kicked off last week, with major banks reporting second-quarter results. While
their results were mixed, they appeared to indicate that consumers and businesses remained
reasonably healthy–a perspective that helped erase some negative sentiment overhanging the market.
As the week progressed, stocks gained momentum as earnings results poured in from different sectors
of the economy, showing that businesses were navigating higher inflation and slowing growth better
than investors feared. Technology and other gloomier sectors were among the market’s best performers
for the week. A few disappointing corporate reports and a weak economic report sent stocks lower to
close out a solid week.
CRACKS IN THE FOUNDATION
Data released last week indicated slowing in the housing market. The latest monthly homebuilder
sentiment survey showed the single largest monthly drop in its 37-year history, except for April 2020.
The sentiment report preceded a drop in June housing starts and issued building permits. Housing starts
declined for the second month, falling 2.0% and surprising economists who had expected an increase.
Housing weakness made itself known through a 5.4% month-over-month decline in June's existing home
sales, representing the slowest pace since June 2020. Increasing prices and higher mortgage rates
demonstrated drags on buyer demand.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: New Home Sales.
Wednesday: FOMC Announcement. Durable Goods Orders.
Thursday: Gross Domestic Product (GDP). Jobless Claims.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Visa, Inc. (V), Alphabet, Inc.
(GOOGL), General Motors Company (GM), The Coca Cola Company (KO), McDonald’s Corporation (MCD),
Archer Daniels Midland Company (ADM), 3M Company (MMM), Texas Instruments, Inc. (TXN),
United Parcel Service, Inc. (UPS), KimberlyClark Corporation (KMB).
Wednesday: The Boeing Company (BA), Ford Motor Company (F), Qualcomm, Inc. (QCOM), Bristol Myers
Squibb Company (BMY), Lam Research Corporation (LRCX), Shopify, Inc. (SHOP), ServiceNow, Inc. (NOW),
General Dynamics Corporation (GD), Norfolk Southern Corporation (NSC).
Thursday: Apple, Inc. (AAPL), Intel Corporation (INTC), Mastercard, Inc. (MA), Pfizer, Inc. (PFE),
Merck & Co., Inc. (MRK), The Southern Company (SO), Northrop Grumman Corporation (NOC),
Southwest Airlines (LUV).
Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Chevron Corporation (CVX),
The Procter & Gamble Company (PG), ColgatePalmolive Company (CL).
There are 174 companies of the S&P 500 reporting earnings this week. The Fed will raise interest rates on
Wednesday and their commentary afterwards is likely to move markets. We expect a 75 basis point increase.
We also get the 2ndquarter GDP on Friday. So, as you can see there is a lot of fundamental data coming out this
So far, 102 companies in the S&P 500 have reported earnings (about 20% of the S&P 500) and overall earnings
results are beating estimates by a median of 7%. And 72% of those reporting are beating estimates. On the top line,
overall results are beating estimates by a median of 1%. And 65% of those reporting are beating estimates. We will
learn a lot more about the economy and markets by week’s end. The base case if earnings hold is for some type of
rally into year's end.
THIS WEEK'S UPDATE
July 26, 2022|