A Brief Market Downturn Appears To Be Developing

Well stocks had a pretty steep sell-off on July 19 with the S&P 500 falling by roughly 60 bps to finish the week at 2976. Pretty much back to where we were yesterday at 2PM. Not surprising given it is the middle of July and a Friday.

Again, we are still in limbo as to which way the market goes from here. However, it seems that the trend is now starting to point to lower prices, potential 2940 or even 2915. But given the strong June performance a minor pullback in July isn’t the end of the world. We will explore this more over the weekend.

S&P 500, spx

S&P 500, spx

Earning Coming In Better

Anyway, Earnings are now pouring in with about 15% of the companies in the S&P 500 so far, and of those 75% have topped estimates, while 18% have missed, and 6.5% have met. Pretty much inline with the historical norm.

eps beats and misses

eps beats and misses

But more importantly earnings estimates have been coming down, with 2019 now at $163.13 and 183.03 for 2020. It leaves the S&P 500 trading at rouhgly 16.3 times 2020 earnings estimates.

Which is still a fairly low earnings mutliple for the index.

Sales and Margins

The one saving grace may come in the form of sales and margins. Revenue growth is up again this quarter by about 3.7%, while margins haves expanded to 11.4% from 11.2% last quarter.

We are still early in the reporting season and results continue to come in better it could provide a second half tailwind for stocks.

have a good friday

This article first appeared on Mott Capital.

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