Earnings Season Begins
Heightened global market volatility continued last week. Stocks slid on Friday, April 13, but still held on to gains for the week. The S&P 500 increased 1.99% and the Dow added 1.79%. International Stocks also rose, gaining 1.45%.
Similar to recent weeks, international events continued to sway markets. Concerns about trade disputes and the escalating conflict in Syria weighed on the minds of investors.
As we track these developments, we also want to share insight about another important occurrence from last week: the beginning of corporate earnings season.
1st Quarter Corporate Earnings Season
1. Expectations remain very high
Analysts anticipate a particularly strong earnings season. Thomson Reuters data predicts that S&P 500 companies' profits were 18.6% higher in the 1st quarter of 2018 than in 2017. If accurate, this increase would be the largest year over year change since 2011.
So far, data seems on track. Although it is still early, according to The Earnings Scout, 1st-quarter earnings growth is currently at 26.8%.
2. Banks outperform but stocks drop
On Friday, 3 major banks released their reports - and each beat projections for earnings and revenue. Despite this positive news, however, their stocks experienced sizable declines that contributed to overall market losses.
Why would strong quarterly results create stocks losses?
Likely, the markets anticipated this positive performance and had already priced it into the shares. As a result, any less-than-ideal news seemed to outweigh the expected earnings and revenue increases. In particular, 2 facts drove losses:
1 bank may have to pay a $1 billion penalty
All 3 banks experienced slow loan growth
We are in the early stages of earnings season, and many major corporations still need to release their reports. In the coming weeks, it will be important to continue monitoring these developments to better understand where corporations and the domestic economy seem to be headed.