Weekly Sector Performance (Stockcharts)
1-Year Chart of the XLKs, Last Week's Best Performing Sector
1-Year Chart of the XLPs, the Worst Performing Sector Last Week
The Q2 earnings season is in full swing with results from 208 S&P 500 members accounting for 50.5% of the index’s total market capitalization already out. As has been the trend in other recent quarters, growth continues to be problematic, with Q2 on track to be the 5th quarter in a row of negative earnings growth for the S&P 500 index. That said, actual results are turning out to be less bad relative to expectations, with the growth pace modestly improving from the prior quarter’s level. Importantly, while estimates for the current period (2016 Q3) have started coming down, they are not falling by as much as was the case at the comparable stage in the prior earnings season.
Total earnings for the 208 index members that have reported results are down -4.7% from the same period last year on +0.4% higher revenues, with 73.1% beating EPS estimates and 51.9% coming ahead of top-line expectations.
There was an investment slump in Q2, even though consumer spending was strong (PCE increased at 4.2% annual rate in Q2).
Residential investment (RI) decreased at a 6.1% annual rate in Q2. Equipment investment decreased at a 3.5% annual rate, and investment in non-residential structures decreased at a 7.9% annual rate.
Although there was an investment slump in Q2 - no worries - residential investment will pickup (still very low), and non-residential (except energy) will also pickup. Investment in inventory has been negative for five consecutive quarters, and that should make a positive contribution soon.
The Recession Probability Index is Incereasing
Domestic Demand is Strong