Earnings season is here once again!
As they do every quarter, the big investment banks kicked off first quarter earnings season last Friday.
It wasn’t a particularly strong start to the season…
While JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WF) and Citigroup (NYSE: C) reported relatively solid revenue and profit numbers, they disappointed on so-called guidance.
That is, they didn’t paint as rosy a picture for the remainder of 2024 as many investors would have liked.
Goldman Sachs (NYSE: GS) remedied that a bit on Monday with results that beat analysts’ expectations for both revenue and profits – and the stock gapped higher on the news.
But there’s much more to come in the next few weeks (you can find a great calendar of S&P 500 earnings reports here).
A Big Week Ahead
Next week will be particularly busy, with more than 50 companies in the S&P 500 reporting (and many more that are not in that index). This includes McDonald’s (NYSE: MCD), Verizon Communications (NYSE: VZ), Alphabet (Nasdaq: GOOGL), Meta Platforms (Nasdaq: META), Eli Lilly (NYSE: LLY), Caterpillar (NYSE: CAT), Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX).
That’s a nice mix of technology stocks, healthcare, consumer discretionary, construction and energy.
And keep in mind that earnings can tell astute investors much more than how individual companies performed during the previous quarter. They deliver important information about the economy, the labor market, consumer and business spending and outlooks, among many other factors that can move the market.
For example, as a leading maker of construction and mining equipment, Caterpillar is considered a bellwether of the global economy. If sales and orders are surging for the company’s products, it’s good news for everyone.
And restaurant stocks like McDonald’s can indicate if consumers are curtailing or increasing their spending – and what they think about inflation.
In fact, every month in The Oxford Communiqué Pro Market Outlook Monthly, I outline which earnings reports investors should watch for such signals.
That’s in addition to the economic data that can move markets and a synopsis of my monthly conversation with Alexander Green about markets and the economy. (If you’re interested in that and the other great benefits, you can check it out here.)
Rising Uncertainties
Right now, there are rising geopolitical uncertainties stemming from wars in the Middle East and Ukraine and their knock-on effects on oil prices. Plus, investors are still coming to grips with the likelihood that the Federal Reserve may only cut its target interest rate once or twice this year – and perhaps not at all.
That means we’ll likely need a strong earnings season to catalyze this bull market to new highs.
There’s good news on that front: the collective earnings of the S&P 500 companies are expected to rise 7% year over year for the first quarter – according to FactSet, which tracks quarterly results. That’s not stunning growth by historical standards, but it’s solid.
And looking ahead, analysts expect year-over-year earnings growth rates of 9.4%, 8.6%, and 17.7% for the second, third, and fourth quarters of 2024, respectively.
Considering stock prices attempt to capture future earnings growth, that’s good news for the current market.
So, right now is a very good time to have your money invested in stocks.
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