New high (lights). The S&P 500 Index completed a V-shaped recovery last week to register its first record high since September 20, 2018—a more than seven-month drought—to close at 2933.68 on April 23. (The index subsequently bested that level on Friday to close at 2939.88.) In today’s Weekly Market Commentary, we share our thoughts on what this record could mean for stocks going forward and make the case that new highs should be celebrated and not feared.
First quarter post-mortem. We’ve finally closed the book on what was one of the most perplexing quarters of this expansion. Luckily, the U.S. economy escaped without a noticeable dent to output, as evidenced in the biggest first quarter gross domestic product (GDP) gain since 2015. In this week’s Weekly Economic Commentary, we’ll dive into the details of the first quarter GDP report, and highlight our thoughts on the sustainability of last quarter’s surprising pace of growth.
Earnings tracking nicely ahead of estimates. With 229 S&P 500 companies having reported, S&P 500 Index earnings growth for the first quarter of 2019 is tracking to flat year over year, about 2% above quarter-end estimates according to Refinitiv (formerly Thomson Reuters). (Note that FactSet calculations point to similar upside but a slightly smaller increase). Consumer discretionary has produced the biggest upside surprise, while energy has posted the biggest shortfall. Revenue is tracking to a 5.1% increase compared with initial expectations at 5.0%. Today kicks off another busy week with 163 S&P 500 companies slated to report.
Earnings estimates have held up well so far during earnings season. The marginal decline in consensus forward earnings estimates may indicate that global growth fears and trade uncertainty may have lowered the bar a bit too much during the first quarter. A likely China trade deal may support near-term earnings upside.
Sell in May Or Stay in May? Hard to believe, but it is nearly the month of May. This will likely bring with it may calls to ‘Sell in May.’ Remember, historically the worst six months of the year have indeed been from May until the end of October. In fact, these six months have been up 1.5% on average and higher about 64% of the time, among the worst out of all possible six-month combinations throughout the year. Be aware though that these six months have actually been higher six of the past seven years, with some solid returns in there. We take a deeper look at this phenomena later today on the LPL Research blog.
Week ahead. Corporate earnings continue to roll in next week, with heavy hitters such as Google, Apple, and McDonalds slated to report. The U.S. also has a full economic docket, headlined by nonfarm payrolls and the Federal Reserve’s next policy meeting. Abroad, first quarter GDP figures are due out for the composite Eurozone, while April manufacturing PMI for China and Japan will garner attention. Track these and other important events on our Weekly Global Economic & Policy Calendar.
- Personal Income (MoM, Mar); Cons: 0.4%, LP: 0.2%
- Personal Spending (MoM, Mar); Cons: 0.8%, LP: 0.1%
- China Non-Manufacturing PMI (Apr)
- China Manufacturing PMI (Apr)
- Pending Home Sales (MoM, Mar); Cons: 1%, LP: -1%
- Conference Board Consumer Confidence Index (Apr); Cons: 126.1, LP: 124.1
- Germany Unemployment Claims Rate (Apr)
- Eurozone Unemployment Rate (Mar)
- Eurozone GDP Report (Q1)
- Germany CPI Report (Preliminary, Apr)
- Canada GDP Report (Feb)
- Nikkei Japan Manufacturing PMI (Apr)
- S&P CoreLogic Case-Shiller Home Price Index (MoM, Feb); LP: 0.11%
- Markit US Manufacturing PMI (Apr); LP: 52.4
- ISM Manufacturing PMI (Apr); Cons: 55, LP: 55.3
- Federal Reserve Rate Decision (May)
- Caixin China Manufacturing PMI (Apr)
- ADP Employment Report (Apr.); Cons: 180K, LP: 129K
- Durable Goods Orders (Mar); LP: -1.6%
- Markit/BME Germany Manufacturing PMI (Apr)
- Markit Eurozone Manufacturing PMI (Apr)
- Initial Jobless Claims (Apr. 27); LP: 192K
- Unemployment Rate (Apr); Cons: 3.8%, LP: 3.8%
- Markit US Services PMI (Apr); LP: 52.9
- Markit US Composite PMI (Apr); LP: 52.8
- ISM Non-Manufacturing Index (Apr); Cons: 57.3, LP: 56.1
- Eurozone PPI Report (Mar)
- Eurozone CPI Report (Preliminary, Apr)Nonfarm Payrolls Report (Apr.); Cons: 185K, LP: 196K
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Index data obtained via FactSet
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