Market Recap – Earnings Season Kicks Off On A Positive Note

in Market Commentary by

Market Digest – Week Ending 7/17

Earnings season kicked off on a positive note. That, coupled with an apparent deal to keep Greece in the Euro sent global stocks higher. High momentum segments like Biotech and Internet companies led the way, sending the Nasdaq Composite to an all-time high. The dollar rose against the Euro.

Weekly Returns:

S&P 500: 2,127 (+2.4%)
FTSE All-World ex-US: (+1.1%)
US 10 Year Treasury Yield: 2.35% (-0.05%)
Gold: $1,134 (-2.5%)
USD/EUR: $1.083 (-2.5%)

Major Events:

• Monday – European leaders reached a harsh bailout agreement for Greece. It includes deep austerity measures and requires Greece to sell some publically held assets.
• Tuesday – Iran reached a nuclear agreement with the US and five other world powers. The deal will remove sanctions and was immediately criticized by Israel and several US congress members.
• Wednesday – Bank of America reported $5.3 billion in earnings for the quarter, exceeding expectations.
• Wednesday – The dollar rose as Federal Reserve Chairwoman Janet Yellen reaffirmed the Fed remains on a path to raise borrowing costs this year.
• Wednesday – Netflix reported greater than expected subscriber growth. Shares rose.
• Thursday – Google reported higher than expected earnings. Shares rose.

Our take:

China, Greece and Iran captured most of the recent headlines and were the primary drivers of the limited volatility in capital markets so far this year. But with valuations above historical levels, ultimately companies will probably be what matters. They must grow if stocks are going to continue to advance.

The quarterly US corporate earnings season is a long one with many ups and downs. But it was encouraging to see it get off to a good start. JP Morgan, Bank of America, Google and Netflix were among companies who delighted investors this week. A generally stronger dollar will continue to be a headwind, but a better job market and increasing real estate and stock market wealth could be enough to provide more positive surprises.

So far July is looking a lot like the latter half of 2014 – the dollar is rising, energy commodities are falling and growth industries like biotech and internet stocks are capturing most of the gains. The S&P 500 is up about 4% year to date, which may not sound exciting. But heading into the week it looked very possible that it would dip into negative territory which would have been concerning.

For now, the bull marches on.

The following two tabs change content below.
Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as the Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

Leave a Reply

Your email address will not be published.

Disclaimer. This Website may contain links to third-party websites. These links are provided solely as a convenience to you and does not imply an affiliation, sponsorship, endorsement, approval, investigation, verification, or monitoring by PCAC of the contents on such third-party websites. Please be advised that PCAC is not responsible for the content of any website owned by a third party.