Getting Ready for the Q2 Earnings Season

The employment numbers in June soared to a level significantly higher than projected, the market notching off 222 thousand new jobs! That number created a tailwind for the Fed, providing it with ample support to make a move this coming September.

Most of investors’ focus, first and foremost, though, will be placed on the Q2 earnings season – which kicks off this Friday with the pivotal earnings numbers from major banks. Citigroup (C), J.P. Morgan (JPM) and Wells Fargo (WFC) are expected to be the first large companies on the S&P 500 to release their numbers for the second quarter.

Tech stocks conceded their place as the markets’ leaders this past month, but the tech sector’s rapid growth is likely to help pump up the market and help it regain investors’ focus.

The tech sector’s upcoming earnings reports, which are expected to record earnings numbers that are stronger than those of the S&P 500 for the 11th quarter in a row, are likely to draw investors back to tech stocks, thought in its own right to have become too expensive.

The sector has plunged 4% since the first week of June, while financial stocks have climbed over 5%, health stocks rallying over 3%. This rotation prompted speculation that investors are cashing out on their tech profits to put their money to work in other market sectors. At the same time, some market analysts believe that all-in-all, tech stocks will take a breather before regaining their footing as the market favorite in the second half of the year.

Chock full of volatility, last week the tech sector ended up 1.3%, retaking the helm among all of the market’s sectors – significantly outperforming the S&P 500, which ended up just 0.3%.

Analysts’ consensus has the earnings reports of tech companies recording Q2 growth of 11.2%, chip companies responsible for most of the gains. This expected growth clip is far higher than the 7.9% projected for the S&P 500,  and likewise, better than that for any other market sector. When considering that the tech sector constitutes a respectable 23% of the entire S&P 500 market cap, the sector’s growth is critical for the market.

A factor that has benefitted tech companies is the sharp decline of 6.1% in the U.S. dollar this year against a basket of major currencies. S&P 500 tech companies make 60% of their revenues outside of the U.S., compared to the 40% figure for the rest of the firms on the index. A weak dollar translates international sales, received in foreign currencies, into a higher dollar-based cash flow.

Crude recorded a selloff on Friday against the backdrop of the weekly oilrig report which noted another uptick in the number of active rigs on U.S. oilfields. At the same time, according to analysts, it’s very possible that more than any other player, it could be American producers who are responsible for crude bottoming in the $40 barrel area.

The oil shale industry in the U.S. has become a powerhouse, hurting global crude prices. Oil shale production levels have seen a breakthrough at precisely the same time as other exporting countries, like Saudi Arabia and Russia, have been cutting production. Market analysts believe that the American crude industry is expected to continue injecting more crude into the marketplace this year, though given low prices, growth this coming year could come out slower. American crude production last week reached a clip of 9.24 million barrels.

The oil shale industry is also producing crude on the sheer basis of economic viability. That’s the reason that were crude to fall beneath an average level of $40 per barrel, we would apparently start seeing a significant slide in oil shale production levels.

Crude closed on Friday at the $44.23 level, recording a sharp daily decline of 2.8%. Crude this year bottomed on June 12th, trading at the $42.05 barrel level, thereafter trading at high volatility levels.

Citigroup analysts are more bearish on crude than they had been in the past and in their view the average price will consolidate around the $50 level this year, instead of their prior $60 target. Its analysts still believe the direction is up, but have backed off from their higher target, noting that the chances of gains to that degree are improbable.

IndexLastDaily change
DJX0.44%21,414Up
SPX0.64%2,425Up
Nasdaq1.04 %6,153Up

Weekly Summary:  Wall Street has succeeded in recovering slightly from its support levels, recording gains. On the week, the Dow Jones recorded gains of 0.68%, the S&P 500, gains of 0.31%, with the NASDAQ rising just a tad, ending up 0.12%.

Have a great trading week!

 

Economic Calendar

 

DAYTIME (EST)EventForecastImpact
Tuesday6:00NFIB Small Business Optimism IndexMedium
Tuesday10:00JOLTSMedium
Tuesday10:00Wholesale TradeMedium
Wednesday8:30Janet Yellen Speaks-0.5%Medium
Wednesday10:00Janet Yellen TestifiesMedium
Wednesday10:30Crude Oil Inventories185KLow
Thursday8:30Initial Claims244KHigh
Thursday8:30PPI-$46.1BHigh
Friday8:30Consumer Price Index56.6High
Friday8:30Retail SalesMedium
Friday9:15Industrial Production173KMedium
Friday10:00Business Inventories4.3%Medium
Friday10:00Consumer SentimentHigh

 

Earning Calendar

 

SymbolCompanyAM/PMDay
HELEHelen of Troy LimitedAMMonday
PEPPepsiCo, Inc.AMTuesday
OZRKBank of the Ozarks, Inc.AMWednesday
FASTFastenal CompanyAMWednesday
DALDelta Air Lines, Inc.AMThursday
PNCThe PNC Financial Services Group, Inc.AMFriday
CCitigroup Inc.AMFriday
WFCWells Fargo & CompanyAMFriday
JPMJPMorgan Chase & Co.AMFriday

 

Today’s Picks – Day Trading!

SymbolBreakoutBreakdownMomentumMomentum
HAIN$39.52AAOISCSS
IVZ$36.00CARLB
CLVS$97.00SLCA
CAT$108.18RH
BA$204.39
UNH$188.66
DLPH$90.05
RRC$20.95
AAP$99.13
 

  

New York Strategy Swing

#DateStockLong\

Short

StatuesData CloseProfit\

Loss

114.6.2017SIGShortClose23.6.2017+2.29%
216.6.2017AABA (YHOO)LongClose26.6.2017+3.14%
321.6.2017KRShortClose27.6.2017-2.75%
429.6.2017DKSShortClose3.7.2017+1.04%
56.7.2017HAINLongOpen +1.36%
66.7.2017DKSShortOpen +0.66%
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Today’s Picks – Swing “New-York Strategy

 No.1 –  ORCL

Company Name
Oracle Corporation
Entry Point49.44
Stop Area48.74
1st Target49.95
Swing Target51.85
Avg. Volume13.2M
SectorTechnology | Application Software
Earning Date
Risk RateNormal
Risk\Reward Ratio3.44:1