Q3 Earnings Season Kicking Off!

Momentum weakened last week, and despite a number of weak daily closings, it wasn’t enough to cause any technical damage. In effect, some technical traders will claim that the flat movement on the indexes last week is exactly what was needed before the earnings season kicks off this week. Indexes entered last week rather stretched, and so, after having traded sideways all week long, they laid down a much better groundwork for upward movement this week.

In Summary for the Week: The S&P 500 tacked on 0.23%, the NASDAQ rising 0.46%.

The Q3 earnings season is expected to be strong, even though earnings growth is expected to be hurt due to Hurricanes Irma, Harvey and Maria. These storms inflicted harm on the general economic figures, and what now waits to be seen is their impact on the earnings of S&P 500 companies, with the first large wave for Q3 coming out this coming week.

The airline sector is expected to take an extremely big hit from the latest natural disasters, after Delta Airlines (DAL) reported large headwinds in the form of $120 million in lost revenues. For insurance companies, though, the pain is likely to be immense – and over the last few weeks insurance companies slashed their forecasts significantly. In effect, the blow that will be taken by insurance companies will be so big that it will shave off whole percentage points from the aggregate earnings growth of the S&P 500; the broad market index is now expected to record growth of 4.4% for Q3. Without the insurance sector, growth would have stood at 7.1%, still substantially beneath last quarter’s earnings growth of 12%.

The insurance companies reporting this week will include Progressive (PGR) on Tuesday, which slashed its earnings forecast by 35% and Travelers (TRV), which on Thursday sliced its own earnings forecast by 32%.

The key companies reporting this week will include Netflix (NFLX) on Monday, and then Johnson & Johnson (JNJ), I.B.M. (IBM) and Goldman Sachs (GS) on Tuesday. United Continental (UAL) and Abbott (ABT) will be reporting on Wednesday. Verizon (VZ) and Blackstone (BLK) will be releasing their numbers on Thursday, with General Electric (GE), Procter & Gamble (PG) and Honeywell (HON) reporting on Friday.

The earnings season promises to revive momentum and action on Wall Street, after the market’s volatility reached historic lows over the last few months. Usually there’s an overarching theme running through the earnings season; trading revolves around that theme and seeing that the week kicks off with a few key firms, we’ll look to identify that theme! We’re entering a period that’s historically positive for the stock market. It’s hard to dispute the track record of the last few months of the year, and the earnings season usually produces market gains. Investors tend to relate to the earnings season in a way very much in keeping with how they relate to the Fed. They want to be gung-ho or enthusiastic about the earnings season, and they usually find the way to do just that!

Have a great trading week!