Earnings Update

We are nearing the end of earnings season, as 87% of companies in the S&P 500 have reported their quarterly earnings.  Of those, 71% have reported earnings above the average analyst estimate while 53% have reported revenues higher than the average analyst estimate.   To date, the blended earnings for the S&P 500 have declined 7.1% year-over-year.  As expected, the energy sector is the biggest “contributor” to this decline.  Earnings have declined 107% for the overall energy sector as aggregate earnings swung to a loss of $932 million (vs. a positive $12.9 billion in earnings last year).  Excluding the energy sector, the S&P 500 earnings would have been a -1.9% vs. the current 7.1% decline.  Materials and financials have also seen their earnings decline, in large part due to the energy sectors decline.   On the flip side, the consumer discretionary sector has reported the largest earnings growth at 19.1% year-over-year.  Telecom was next with 16.6% year-over-year growth, followed by the health care sector at 7.1%.

Based on current analyst estimates, the S&P 500 should see another year-over-year decline in earnings for the second quarter.  This is expected to once again be led by the energy sector.  Currently, the estimate is for a year-over-year decline of 4.7%.  Growth in earnings is anticipated to return in the third and fourth quarters of 2016, with current consensus to be growth of 1.4% and 7.5%, respectively.  If the earnings play out as anticipated, we would be looking at a 0.9% increase for all of 2016.

Next week, 20 companies in the S&P 500 are scheduled to report earnings.  A few notable companies scheduled to report include Walt Disney (DIS), Ameren (AEE), Macy’s (M), and Cheniere Energy (LNG).


U.S. Adds 160,000 Jobs in April:

U.S. employers added 160,000 jobs in April, making it the fewest number of new workers in seven months.  The average economist estimate was for 200,000.  New York Fed President William Dudley wasn’t overly concerned from the data and says expectations for rate hikes this year remain the same.  “It’s a touch softer, maybe, than what people were expecting, but I wouldn’t put a lot of weight on it terms of how it would affect my economic outlook.”

The unemployment rate remained unchanged.  While the jobs number was a bit disappointing, it still shows that the U.S. labor market remains healthy.   A bright spot in the Labor Department’s report was found in the hourly earnings of U.S. workers, which rose 0.3% over March.  Wage growth has long been growing at a very slow pace, though it will take more than one month of data to push this higher.


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