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.

Index Last Daily change
DJX 0.44% 21,414 Up
SPX 0.64% 2,425 Up
Nasdaq 1.04 % 6,153 Up

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

 

DAY TIME (EST) Event Forecast Impact
Tuesday 6:00 NFIB Small Business Optimism Index Medium
Tuesday 10:00 JOLTS Medium
Tuesday 10:00 Wholesale Trade Medium
Wednesday 8:30 Janet Yellen Speaks -0.5% Medium
Wednesday 10:00 Janet Yellen Testifies Medium
Wednesday 10:30 Crude Oil Inventories 185K Low
Thursday 8:30 Initial Claims 244K High
Thursday 8:30 PPI -$46.1B High
Friday 8:30 Consumer Price Index 56.6 High
Friday 8:30 Retail Sales Medium
Friday 9:15 Industrial Production 173K Medium
Friday 10:00 Business Inventories 4.3% Medium
Friday 10:00 Consumer Sentiment High

 

Earning Calendar

 

Symbol Company AM/PM Day
HELE Helen of Troy Limited AM Monday
PEP PepsiCo, Inc. AM Tuesday
OZRK Bank of the Ozarks, Inc. AM Wednesday
FAST Fastenal Company AM Wednesday
DAL Delta Air Lines, Inc. AM Thursday
PNC The PNC Financial Services Group, Inc. AM Friday
C Citigroup Inc. AM Friday
WFC Wells Fargo & Company AM Friday
JPM JPMorgan Chase & Co. AM Friday

 

Today’s Picks – Day Trading!

Symbol Breakout Breakdown Momentum Momentum
HAIN $39.52 AAOI SCSS
IVZ $36.00 CAR LB
CLVS $97.00 SLCA
CAT $108.18 RH
BA $204.39
UNH $188.66
DLPH $90.05
RRC $20.95
AAP $99.13
 

  

New York Strategy Swing

# Date Stock Long\

Short

Statues Data Close Profit\

Loss

1 14.6.2017 SIG Short Close 23.6.2017 +2.29%
2 16.6.2017 AABA (YHOO) Long Close 26.6.2017 +3.14%
3 21.6.2017 KR Short Close 27.6.2017 -2.75%
4 29.6.2017 DKS Short Close 3.7.2017 +1.04%
5 6.7.2017 HAIN Long Open   +1.36%
6 6.7.2017 DKS Short Open   +0.66%
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Today’s Picks – Swing “New-York Strategy

 No.1 –  ORCL

Company Name
Oracle Corporation
Entry Point 49.44
Stop Area 48.74
1st Target 49.95
Swing Target 51.85
Avg. Volume 13.2M
Sector Technology | Application Software
Earning Date
Risk Rate Normal
Risk\Reward Ratio 3.44:1