Earnings Dominate the Markets!

The picture emerging from the Q4 earnings season is one of all around strength and momentum.

With results from 26% of the S&P 500 members already out and another 24% to report results this week, we will be at the halfway mark by the end of this week.

Total earnings for the 133 S&P 500 members that have reported results already are up +12.3% from the same period last year on +8.8% higher revenues, with 81.2% beating EPS estimates and 78.9% beating revenue estimates.

The proportion of companies beating both EPS and revenue estimates is 65.4%.

Total Q4 earnings are expected to be up +11.6% from the same period last year on +7.5% higher revenues.

This would follow +6.7% earnings growth in 2017 Q3 on +5.9% growth in revenues.

Here are some earning highlights from the last few trading sessions.

Boing – Boeing reports Q4 results before the market’s open on Wednesday, January 31st. The company is expected to earn $2.91 per share on $24.83 billion in revenues, up +17.8% and +6.6% from the year-earlier period, respectively.

Facebook – The social-media giant reports Q4 results after the market’s close on Wednesday, January 31st. The company is expected to earn $1.94 per share on $12.56 billion in revenues, up +37.6% and +42.6% from the year-earlier period, respectively.

Amazon – Expected to report fourth-quarter earnings per share of $1.85 on revenue of $59.98 billion. Those numbers would represent 20 percent and 37 percent growth, respectively. Earnings come out on February 1st and we can expect increased volatility in the stock prior to that time.

Apple – The tech giant reports Q4 results after the market’s close on Thursday, February 1st. The company is expected to earn $3.81 per share on $86 billion in revenues, up +13.4% and +9.8% from the year-earlier period, respectively.

Total earnings for the 133 S&P 500 members that have reported results already are up +12.3% from the same period last year on +8.8% higher revenues, with 81.2% beating EPS estimates and 78.9% beating revenue estimates.

Technically, the stock is overall stock market is slightly weaker.

We can expect volatility to begin declining till another major catalyst occurs.

Expect VIX to decline below 10 level over the next few sessions.

More upside is expected from the overall market based on the current expectations.

We have to keep eye on bonds as yields begin increasing.

Some degree of increased yield is healthy for financial stocks and may impede retail slightly.

Don’t expect long term momentum to continue without seeing some congestion or pullback away from the main trend.

Reasonable target in the near term is 50 day moving average line.

Most sectors are currently stable…except for defensive shares such as utilities.

We are seeing strong correlation between the long term bond and defensive stocks, which is expected during ripe bull market cycles.

Don’t expect too much diversion between major indices, since the broad market is fairly balanced at this time, especially in light of the sharp selling pressure and increased volatility that we’re seeing at this time.

SVXY which tracks inverse volatility closed substantially above the opening on Tuesday, which tells me that the current downside pressure may be coming to a halt.

If price can take out the high over the next few sessions, the odds are strong that SVXY will attempt to test the previous high price over the next few weeks or maybe less…depending on how earnings continue and more importantly global tension.

Roger Scott
Senior Publisher

Wealth365.com