Stocks continue their slide. U.S. stocks continued their slide last week, as the S&P 500 Index fell for the third straight week. Global uncertainty has especially weighed on larger, multinational companies: the Dow posted its fifth straight down week last week, its longest losing streak since June 2011. There haven’t been any significant developments in trade talks recently, just back-and-forth threats between the U.S. and China. However, the barrage of headlines has been enough to knock U.S. stocks off of record highs.
Brexit developments. The United Kingdom’s populist pro-Brexitparty snapped up about a third of the votes in Parliament elections over the weekend (according to polls), just a few days after British Prime Minister Theresa May announced her resignation. May’s departure and more pro-Brexit officials in Parliament have raised the stakes for Brexit, as both developments could increase political pressure for a quicker exit from the European Union. A no-deal Brexit is the worst-case scenario for the global economy, although we still believe this outcome is unlikely.
Earnings season winds down. With just 17 S&P 500 companies left to report, first quarter 2019 earnings are up 1.5% year over year, 3.6 percentage points above January 1, 2019 estimates (source: Refinitiv). Revenue growth of 5.6% is also nicely above prior estimates. Forward earnings estimates have fallen by a below-average 0.6% since April 1. This week, nine S&P 500 companies will report quarterly results.
The week ahead. As earnings season winds down, investors will likely be more focused on macro developments, including economic reports. In the U.S., the first revision of first-quarter gross domestic product is the highlight of this week’s economic slate. Core personal consumption expenditures data for April, which will be released May 31, should provide more color on the state of U.S. inflation. Overseas, investors will be watching the May update of China’s official Purchasing Managers’ Index, especially after recent economic data out of China has been disappointing.
Five forecasters. It’s been a difficult year for Wall Street forecasts, and near-term forecasting has been a futile effort this year. However, our Five Forecasters, a compilation of our favorite longer-term economic indicators, have been surprisingly resilient throughout this year’s rocky start. We’re highlighting all five of them and their economic and market signals in this week’s Weekly Economic Commentary and Weekly Market Commentary, as well as on the LPL Research blog.
- S&P Core Logic Case-Shiller Home Prtice Index (MoM, Mar)
- Conference Board Consumer Confidence Index (May)
- Dallas Fed Manufacturing Activity Index (May)
- Eurozone Economic Confidence Index (May)
- Eurozone Consumer Confidence (May)
- Germany Unemployment Claims Rate (May)
- GDP Report (First Revision, Q1 2019)
- Initial Jobless Claims (May 25)
- Pending Home Sales (MoM, April)
- Japan Jobless Rate (Apr)
- Japan Tokyo CPI Report (May)
- Japan Industrial Production (Preliminary, Apr)
- Japan Retail Sales (Apr)
- China Manufacturing PMI (May)
- Personal Income (MoM Apr)
- Personal Spending (MoM, Apr)
- Core PCE (MoM Apr)
- University of Michigan Sentiment Index (May)
- Japan Consumer Confidence Index (May)
- Germany CPI Report (Preliminary, May)
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Index data obtained via FactSet
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