Quarterly earnings season kicks off this week, and according to FactSet, it should be a strong one. Earnings for S&P 500 companies are seen coming in at $32.34 a share in the third quarter. That represents growth of 2.8 percent from a year ago. Sales are seen rising 4.8 percent compared with the third quarter of 2016.
J.P. Morgan Chase & Co. is even more bullish on the coming season. Their recent reports indicate that the overall earnings per share growth rate could be more than three times that of current consensus expectations.
But these forecasts have dimmed in recent months. Profit expectations have dropped 4.2 percent since the end of June, when earnings were seen coming in at $33.76 a share, according to FactSet.
Tuesday, October 10, 2017
Monday, October 9, 2017
The Surprising Trend in Small Caps
The S&P 500 index of large-cap stocks is up 14 percent year to date, and has been climbing the entire year, supported by solid earnings growth. The small-cap Russell 2000 index is up just 11 percent year to date - but it's catching up to the big boys.
More than half of that gain, or 6 percent, came in September. The small-cap index rose even as earnings picture for the sector deteriorated, with analysts penciling in a decline in earnings for the third quarter. What is most surprising, though, is what kind of smaller companies have rallied so far this year - primarily those of lower quality.
According to WisdomTree, the Russell 2000’s non-dividend payers returned 18.7 percent year-to-date. Shares of companies with negative earnings returned 21.7 percent, and the companies in the lowest return-on-equity quartile returned 22.7 percent - twice the return of the underlying index.
More than half of that gain, or 6 percent, came in September. The small-cap index rose even as earnings picture for the sector deteriorated, with analysts penciling in a decline in earnings for the third quarter. What is most surprising, though, is what kind of smaller companies have rallied so far this year - primarily those of lower quality.
According to WisdomTree, the Russell 2000’s non-dividend payers returned 18.7 percent year-to-date. Shares of companies with negative earnings returned 21.7 percent, and the companies in the lowest return-on-equity quartile returned 22.7 percent - twice the return of the underlying index.
Friday, October 6, 2017
September's Jobs Report
The U.S. economy lost 33,000 jobs in September, primarily due to the effects of hurricanes Harvey and Irma, the Bureau of Labor Statistics reported this morning. Nevertheless, the headline unemployment rate dropped to 4.2 percent, the lowest that number has been since 2000.
This was the first month in which the economy shedded jobs in seven years. On top of that, revisions to the employment numbers from July and August reduced the number of jobs added in those months by an additional 38,000.
The net loss of jobs is expected to be a temporary blip. For comparison, payroll gains had averaged 249,000 in the six months before Hurricane Katrina at the end of August in 2005. After the storm struck New Orleans, employment gains averaged 76,000 over the next couple of months before rebounding strongly to 341,000 in November 2005.
This was the first month in which the economy shedded jobs in seven years. On top of that, revisions to the employment numbers from July and August reduced the number of jobs added in those months by an additional 38,000.
The net loss of jobs is expected to be a temporary blip. For comparison, payroll gains had averaged 249,000 in the six months before Hurricane Katrina at the end of August in 2005. After the storm struck New Orleans, employment gains averaged 76,000 over the next couple of months before rebounding strongly to 341,000 in November 2005.
Thursday, October 5, 2017
Where Our Area Gives
Fidelity Charitable recently came out with a fascinating study of Americans' charitable giving, looking at what charities people in different metropolitan areas are most likely to support. The New York/Northern New Jersey area ranked near the top of many of the lists, ranking number one in one area: People from around here are most likely to give to international affairs organizations.
Other areas of giving where we rank highly:
Other areas of giving where we rank highly:
- Society Benefit (including civil rights, community improvement, social advocacy and volunteer organizations): 2nd
- Education: 4th
- Health: 5th
- Arts and Culture: 6th
- Human Services (nonprofits that provide basic, daily care including food banks, homeless shelters and youth programs): 10th
Wednesday, October 4, 2017
Auto Sales Bounce Back
Led by strong truck and SUV sales and the replacement of cars destroyed by Hurricane Harvey in Texas, the auto industry posted its first monthly sales gain of the year in September. U.S. sales rose 6.1 percent to a total of just over 1.5 million vehicles.
Of the major automakers, only Fiat Chrysler and Hyundai reported sales declines. GM reported that sales rose 11.9 percent from a year ago, while Ford sales rose 8.7 percent. Toyota posted a 14.9 percent increase, Nissan sales were up 9.5 percent, and Honda sales rose 6.8 percent. Volkswagen said its sales rose 33.2 percent over numbers that were depressed a year ago by its diesel emissions cheating scandal.
Industry analysts expect sales to be strong through the end of the year, fueled by customers whose cars were destroyed by Harvey and Hurricane Irma in Florida. But that's not expected to be enough to match last year's record number of more than 17.5 million cars sold.
Of the major automakers, only Fiat Chrysler and Hyundai reported sales declines. GM reported that sales rose 11.9 percent from a year ago, while Ford sales rose 8.7 percent. Toyota posted a 14.9 percent increase, Nissan sales were up 9.5 percent, and Honda sales rose 6.8 percent. Volkswagen said its sales rose 33.2 percent over numbers that were depressed a year ago by its diesel emissions cheating scandal.
Industry analysts expect sales to be strong through the end of the year, fueled by customers whose cars were destroyed by Harvey and Hurricane Irma in Florida. But that's not expected to be enough to match last year's record number of more than 17.5 million cars sold.
Tuesday, October 3, 2017
Third Quarter Scorecard
The third quarter of 2017 is now in the books, and it was a strong quarter for investors, in what is also shaping up as a very strong year. Here's a scorecard for the major indexes:
- S&P 500 up 4.4% in the third quarter, up 14.0% year to date
- Dow Jones Industrial Average up 5.6% in the third quarter, up 15.3% year to date
- Nasdaq up 5.9% in the third quarter, up 23.6% year to date
- S&P Midcap 400 up 3.2% in the third quarter, up 9.3% year to date
- S&P Smallcap 600 up 6.2% in the third quarter, up 9.0% year to date
Monday, October 2, 2017
An Upgrade to Second Quarter Growth
The U.S. economy’s pace of growth in the second quarter was raised to
3.1 percent from 3 percent on Friday. According to the final revisions from the federal government, the U.S. expanded in the second quarter at the fastest clip in two years.
The U.S. is on track to grow slightly faster than 2 percent in 2017, keeping in line with growth trends since the end of the Great Recession. The somewhat stronger pace of growth in the spring mostly reflects higher farmer inventories. The production of unsold goods such as crops or new cars adds to GDP, and the value of inventories rose by $5.5 billion, stronger than previously reported.
Other key figures in the government’s third estimate of GDP, including readings on inflation, were little changed. The increase in consumer spending, considered the largest driver of economic growth, was unchanged at 3.3 percent.
The U.S. is on track to grow slightly faster than 2 percent in 2017, keeping in line with growth trends since the end of the Great Recession. The somewhat stronger pace of growth in the spring mostly reflects higher farmer inventories. The production of unsold goods such as crops or new cars adds to GDP, and the value of inventories rose by $5.5 billion, stronger than previously reported.
Other key figures in the government’s third estimate of GDP, including readings on inflation, were little changed. The increase in consumer spending, considered the largest driver of economic growth, was unchanged at 3.3 percent.
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