Market Recap – Earnings Season Kicks Off On A Positive Note

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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.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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