Markets closed out last week with minimal gains, but the S&P 500 and Nasdaq Composite still gained over 1% each for the week. Earnings season is showing strong growth, with a 5.4% increase in earnings for the first quarter. This positive trend in earnings is pushing the S&P 500’s twelve-month forward-looking P/E ratio to 20.4, above the historical averages. Sectors such as Communications, Utilities, Consumer Discretionary, and Tech are leading the way in earnings growth, while Healthcare is seeing disappointing numbers.
Forward-looking guidance is also a crucial aspect of earnings season, with around eighty companies already offering guidance for the second quarter. While fifty of those companies have provided negative guidance, thirty have given positive guidance. This guidance will be closely monitored, especially as an increase of 9.3% in overall earnings is expected for the second quarter. Companies that miss earnings expectations are being punished more severely this quarter, while companies that beat expectations are seeing stock price increases in line with historical averages.
Despite earnings season winding down, some major companies, including Home Depot, Cisco Systems, and Walmart, are still set to report this week. In addition to earnings reports, important economic data such as the Producer Price Index (PPI) and Consumer Price Index (CPI) are expected to be released. Retail Sales data and speeches from Federal Reserve members, including Chairman Powell, are also on the calendar for this week. Market volatility remains low, but that could change as the week progresses.
Looking ahead, investors should stick with their investment plans and long-term objectives as market conditions may shift. The strong earnings growth seen this quarter is a positive sign for the overall market, but potential market movements in response to economic data and company earnings should be monitored closely. Overall, the outlook remains positive as markets continue their winning streak, supported by strong earnings and economic data.
