MARKETS
Most Stocks Are Going Up
It’s all about earnings right now.
If Bill Dudley thought now is the time to cut rates somebody on the Federal Open Market Committee probably did too.
But recent growth, employment, and inflation data suggest officials still have time to wait.
Was that a relief rally on Friday?
Nobody knows for sure; investors, traders, and speculators make buy-hold-sell decisions based on an inestimable number of general and specific factors.
It does make a good narrative and even a little bit of sense too: Rates will ease, and soon, but the underlying economy is also basically healthy.
Tech continues to take it on the chin, but the Russell 2000 continues to outperform.
Index-level price action is creating some concern, and some market participants have questions about leadership.
But it’s notable that the New York Stock Exchange Advance-Decline Line just hit a new all-time high.
Here’s why, courtesy of my friend J.C. Parets of All Star Charts: “An advance-decline line is calculated by taking the difference between advancing stocks and declining stocks on a given day, and then adding that result to the prior day's already existing A-D line.”
It’s a good and useful measure of market breadth.
The number of new 52-week highs on the NYSE just reached a new near-term high, as did the percentage of stocks on that exchange above their 200-day-moving average.
And the NYSE A-D line closed out last week at its highest levels in history.
It is a market of stocks; the indexes are nothing without them.
And, ultimately, as David Baskin notes in a recent edition of The StockPick Interview, “As we see second quarter earnings come in, we'll get a better idea of who's making money and who's not.
“In our view, markets are always driven in the end by corporate earnings.”
There’s nothing on the economic calendar today, though McDonald’s $MCD and ON Semiconductor $ON will get a crucial earnings reporting week started before the opening bell.
And the FOMC will meet Tuesday and Wednesday, with Federal Reserve Chair Jerome Powell hosting a press conference at 2:30 p.m. on July 31.
The consensus expectation is that the Fed will hold steady this week and set the stage for a September cut – subject, of course and as ever, to incoming data.
What will really drive markets are earnings results and guidance from four of The Magnificent Seven.
Microsoft $MSFT will report fiscal fourth-quarter numbers after Tuesday’s closing bell.
Meta Platforms $META and Amazon.com $AMZN will release second quarter results after the close on Wednesday.
And Apple $AAPL will deliver its fiscal first-quarter report after the close on Thursday.
Forty-one percent of the companies in the S&P 500 had reported through July 26.
Seventy-eight percent have exceeded earnings per share estimates, better than the five-year average of 77 percent.
Companies are beating estimates by an average of 4.4 percent, below five- and 10-year averages of 8.6 percent and 6.8 percent, respectively, but those rates are based on actual results from all companies in the index.
So let’s stay tuned for earnings and guidance this week.