What to expect from quarterly company reports?

Last week, the shares set new highs and showed solid growth.

Both the S & P 500 and Dow have overcome important psychological boundaries. 

This week, quarterly reports of the largest S & P 500 companies are expected.

Since their business is largely dependent on international operations, it is expected that the current risks of the US-China trade war will significantly affect their quarterly results.

The S & P 500 rose above 3000 for the first time in history, an increase of 3,013, to 0.8% during the week. The Dow index rose above 27,000 and ended the week at 27,332, an increase of 1.5% over the week.

An optimistic premise was the speech of Fed Chairman Jerome Powell in Congress. An official announcing an increasing number of factors that lead to lower interest rates.

The Fed rate cut is widely expected among analysts and market experts as an aid to stabilization and growth factor in the stock market. The Fed is expected to announce lower rates at its next meeting, July 30-31.

What does the stock market expect this week?

Major financial companies, banks and technology giants report on their profits and earnings this week.

On Monday

Citigroup (C) is the first among the largest US banks to publish its quarterly report.

On Monday, there will also be a significant event for large retailers. Amazon (AMZN) will hold the biggest sale, which is expected to surpass Black Friday and Prime Day last year.

On Tuesday

Reports expected: Goldman Sachs (GS), Wells Fargo (WFC), JP Morgan (JPM), Johnson & Johnson (JNJ), Charles Schwab (SCHW), United Airlines (UAL) and others.

The government’s retail sales report for June is also expected on Tuesday. These data, according to Powell, will be one of the key ones being considered by the Fed. Economists expect an increase in sales by 0.3% compared with the May 0.5%.

On Wednesday

Bank of America (BAC), Netflix (NFLX), IBM, Alcoa (AA) and others.

On Thursday

Morgan Stanley (MS), Microsoft (MSFT) and others.

On Friday

American Express (AXP), BlackRock and others.

Analysts say that the upcoming reports will reflect the worsening prospects for the global economy and the US economy and the negative effects of trade wars. It is expected that the profit of the S & P 500 will decline in the second quarter by 2.9%, reports FactSet. According to analysts, of the 114 companies that issued forecasts for the quarter, 77% published negative forecasts.

The international industrial distributor Fastenal Company, referring to the S & P 500, in its quarterly report on Thursday, already announced the impact of trade duties. Fastenal said the company was able to raise prices, but at the same time, it suffered from rising costs.

Peter Bukkvar, director of investments at the Bleakley Advisory Group, said that other transnational corporations could follow Fastenal.

“They (Fastenal) talked about slowing growth … and the impact of duties on the value of their goods. They are trying to convey this, ”said Bukkvar. “You are talking about the S & P 500, where 40% of revenues come from abroad, and growth abroad is slowing. They will obviously reflect that. ”

Bukkvar also suggested that the upcoming reports would show the effect of increasing duties on Chinese goods by $ 200 billion from 10% to 25%, introduced by the Trump administration since May 10.

“The revenues of this quarter will really determine this influence. Many companies said: “10% — we can cope, but 25% is a problem,” said Bukkvar.

Some analysts expect the reporting season to cause controversy, but a more serious catalyst for the markets will be either a positive or a negative development of a trade war. So far, the United States and China have announced a truce, but no real signs of progress in the negotiations have been noticed.

Marketinfo.pro recently wrote that «China still does not fulfill promises by agreement with the United States.»

“We know that the results of the reports will be bad. But the market is looking at what will happen next, ”said Scott Rehn, senior US investment strategist at Wells Fargo Investment Institute. “We expect forecasts from these companies, but let’s face it, they will all use the trade effect as an excuse, and some of them plan to add a strong dollar to this. But the reality is that the dollar has been in this position for more than a year. ”

Kenneth Leon, CFRA Research banking analyst, says that although financial institution stocks have improved this quarter, their results, compared with last year, will show a deterioration in trading and underwriting operations. However, the analyst predicts improvements in such areas as commercial and consumer lending, credit cards, merger consulting and IPO underwriting.

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