Investors Brace Themselves for Q2 Reports

The earnings reports for Q2 are quickly approaching, investors hoping to see the continuation of the strong Q1 earnings results in order to justify high stock valuations – which are now not far off from their all-time highs! At the same time, the fissure – or crack – in investors’ pollyannic narrative is beginning to expand, finding expression in the bear market that crude entered last week (having now fallen over 20% since the latest high) and the latest economic figures depicting a slower growth pace than had been expected earlier this year.

High expectations for the continuation of the recovery in earnings numbers hinges on crude trading in a $47-$50 barrel range. That being the case, if we don’t see such a range playing out, it’s probable that we won’t be getting the strong earnings reports the market had set its hopes on. The matter is not a trivial one – but in its own right opens the door for a large measure of uncertainty, and could usher in a period of heightened volatility.

Crude prices have seen downward pressure of late due to excess supply. Throughout Q1, crude traded at an average price of $48, though come this past Friday, was trading at just $43 a barrel, having fallen over 20% since February when crude traded at a year-and-a-half high.

U.S. stocks are in their ninth year of a bull rally, optimism recently reignited by newly elected President Trump’s growth-leaning policies. At the same time, with the timetable for Trump’s major reforms having been pushed back, earnings reports are critical for supporting stock prices.

With indexes trading close to their all-time highs, there’s speculation among Wall Street analysts whether a large correction will kick off any time soon. Expectations for U.S. firm earnings for 10 of 11 market sectors have been on the downtick since the beginning of April, with only the industrial sector seeing heightened earnings expectations.

The S&P 500 as a whole is expected to record earnings growth of 7.9%, a decline from the 15.3% uptick in Q1, and beneath the market consensus of 10.2% back in April.

This coming Thursday, it will be the giant sports and apparel company, Nike (NKE) which will be the first Dow Jones reporter for the current earnings season. Thereafter, the pace of earnings releases is expected to grow significantly come the second week of July.

The earnings reports of tech companies are projected to record double-digit growth after a boost from chip companies. Financial stocks fall not far behind with a growth forecast of 8.1% for Q2.

Despite the anticipation that low energy prices will give a number of sectors a boost – e.g. the transportation and industrial sectors – as well as add to consumer optimism, what all of this means for the high expectations in place for energy companies’ earnings reports is that any deviation will be readily felt.

Energy firms’ earnings are expected to record a significant year-over-year quarterly rise of 683%, many energy companies losing money in the parallel quarter last year. The aggregate earnings growth forecast for the S&P 500 is in no negligible part contingent on energy firms’ Q2 earnings, without which the S&P 500 is expected to record earnings growth of just 4.8%.

Expectations for energy firms’ earnings will seemingly need to take a step back in the second half of the year in the event the weak price trend in crude continues. The wild card at the heart of the matter is the price of crude, expectations now baked in for crude prices going up rather down.

In light of the recent – and strong – fall in crude, the energy sector (XLE) is now on track to record the weakest performance year-to-date of all of the sectors on the S&P 500, its stocks having now fallen almost 15%.

Another pitfall for this earnings season and the next one to boot will be the pace at which companies are buying back their shares. These last 2 years, over 20% of S&P 500 companies were able to add at least 4% to their earnings per share (EPS) through lowering the number of shares traded in the marketplace.

The first quarter of 2017 is the first in which the percentage thereof has fallen – only 14.8% of firms adding 4% to EPS by virtue of buybacks. Likewise, there are indications we’ll see even less support in Q2.

Index Last Daily change
DJX (0.01%) 21,395 Down
SPX 0.16% 2,439 Up
Nasdaq 0.46% 6,265 Up


Have a great trading week!


Economic Calendar


DAY TIME (EST) Event Forecast Impact
Monday 8:30 Durable Orders -0.6% Medium
Tuesday 10:00 Consumer Confidence 116.7 Medium
Wednesday 10:30 Crude Oil Inventories Low
Thursday 8:30 GDP – Third Estimate 1.2% High
Thursday 8:30 Initial Claims 241K High
Friday 8:30 Personal Income 0.3% Medium
Friday 8:30 Personal Spending 0.1% Medium
Friday 8:30 PCE Prices Medium
Friday 9:15 Chicago PMI 57.8 Medium
Friday 10:00 Michigan Sentiment – Final 94.7 High


Earning Calendar


Symbol Company AM/PM Day
FDS FactSet Research Systems Inc. BMO Tuesday
DRI Darden Restaurants, Inc. BMO Tuesday
PAYX Paychex, Inc. BMO Wednesday
GIS General Mills, Inc. BMO Wednesday
MON Monsanto Company BMO Wednesday
WOR Worthington Industries, Inc. AMC Wednesday
MKC McCormick & Company, Incorporated BMO Thursday
CAG Conagra Brands, Inc. BMO Thursday
WBA Walgreens Boots Alliance, Inc. BMO Thursday
STZ Constellation Brands, Inc. BMO Thursday
NKE NIKE, Inc. BMO Thursday
MU Micron Technology, Inc. AMC Thursday


Today’s Picks – Day Trading!

Symbol Breakout Breakdown Momentum Momentum
JD $43.80 JD SYY
WDAY $104.53 EQT LOW
DNOW $15.00    
DLTR $65.63    


New York Strategy Swing

# Date Stock Long\


Statues Data Close Profit\


1 1.5.2017 AAOI Long Close 2.5.2017 +0.54%
2 3.5.2017 SCSS Long Close 9.5.2017 -1.71%
3 4.5.2017 CRZO Short Close 5.5.2017 +0.30%
4 8.5.2017 WTW Long Close 16.5.2017 +6.09%
5 15.5.2017 AAN Long Close 16.5.2017 -1.70%
6 16.5.2017 CCL Long Close 17.5.2017 -0.41%
7 17.5.2017 AMAG Short Close 24.5.2017 +5.38%
8 17.5.2017 AAN Long Close 24.5.2017 -2.59%
9 19.5.2017 TRCO Long Close 23.5.2017 -1.45%
10 19.5.2017 GIMO Long Close 26.5.2017 +2.05%
11 1.6.2017 BF.B Long Close 6.6.2017 +0.95%
12 7.6.2017 LULU Long Close 9.6.2017 -2.24%
13 14.6.2017 SIG Short Close 23.6.2017 +2.29%
14 16.6.2017 AABA (YHOO) Long Open +3.02%
15 21.6.2017 KR Short Open   -1.85%