Market Snapshot
| Dow | 38461.51 | -422.16 | (-1.09%) | | Nasdaq | 16170.36 | -136.28 | (-0.84%) | | SP 500 | 5160.64 | -49.27 | (-0.95%) | | 10-yr Note | -56/32 | 4.56 |
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| | NYSE | Adv 415 | Dec 2352 | Vol 930 mln | | Nasdaq | Adv 957 | Dec 3286 | Vol 5.3 bln |
Industry Watch
| Strong: Energy |
| | Weak: Real Estate, Utilities, Materials, Financials, Industrials, Consumer Discretionary |
Moving the Market
-- Reacting to hotter than expect CPI data
-- Sharp increase in market rates
-- Rethinking rate cut expectations in response to the inflation data
-- Gains in some mega cap names limiting downside moves at the index level
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Closing Summary
10-Apr-24 16:30 ET
Dow -422.16 at 38461.51, Nasdaq -136.28 at 16170.36, S&P -49.27 at 5160.64
[BRIEFING.COM] The stock market had a weak showing today. Stocks logged sizable declines and Treasuries settled with sharp losses following the hotter than expected March Consumer Price Index (CPI). Total CPI increased 0.4% month-over-month versus an expected 0.3% increase and core-CPI, which excludes food and energy, increased 0.4% month-over-month versus an expected 0.3% increase.
The 10-yr note yield, at 4.35% just before 8:30 ET, climbed 19 basis points from yesterday to 4.56%. The 2-yr note yield, which is most sensitive to changes in the fed funds rate, jumped 22 basis points to 4.97%
The CPI report fueled worries about ongoing hawkishness from the FOMC and drove participants to rethink rate cut expectations. The probability of a rate cut at the June FOMC meeting stands at just 17% now versus 57.4% yesterday, according to the CME FedWatch Tool.
The market's expectations at the start of the year were for six rate cuts by the end of 2024, but the sudden change today leaves the market with only two expected rate cuts now.
Just about everything in the stock market participated in downside moves. The Invesco S&P 500 Equal Weight ETF (RSP) declined 1.7% and ten of the 11 S&P 500 sectors logged losses ranging from 0.2% to 4.1%.
Some influential stocks that have logged huge gains since the start of the year outperformed today, closing with gains. Meta Platforms (META 519.83, +2.93, +0.6%), Amazon.com (AMZN 185.95, +0.28, +0.2%), NVIDIA (NVDA 870.39, +16.85, +2.0%), and Eli Lilly (LLY 761.98, +4.74, +0.6%) were winning standouts in that respect. META is up 46.9% this year, AMZN is up 22.4% in 2024, NVDA sports a 75.8% gain this year, and LLY shows a 30.7% gain on the year.
- S&P 500:+8.2% YTD
- Nasdaq Composite: +7.7% YTD
- S&P Midcap 400: +5.9% YTD
- Dow Jones Industrial Average: +2.1% YTD
- Russell 2000: +0.1% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 0.1%; Last week was -0.6%.
- March CPI 0.4% vs Briefing.com consensus of 0.3%; February was 0.4%
- March Core CPI 0.4% vs Briefing.com consensus of 0.3%; February was 0.4%
- The key takeaway from the report is that the yr/yr reading of headline CPI accelerated for the second consecutive month, which will boost expectations for ongoing hawkishness from FOMC officials, in turn pressuring expectations for a rate cut in June.
- February Wholesale Inventories 0.5% vs Briefing.com consensus of 0.5%; January was 0.3%
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: March PPI (Briefing.com consensus 0.3%; prior 0.3%), Core PPI (Briefing.com consensus 0.2%; prior 0.6%), Weekly Initial Claims (Briefing.com consensus 218,000; prior 221,000), and Continuing Claims (prior 1.791 mln)
- 10:30 ET: Weekly natural gas inventories (prior -37 bcf)
Treasuries settle with sharp losses after CPI
10-Apr-24 15:30 ET
Dow -467.89 at 38415.78, Nasdaq -162.00 at 16144.64, S&P -54.54 at 5155.37
[BRIEFING.COM] The market is experiencing some volatility ahead of the close.
Treasuries settled with sharp losses in response to the March CPI report. The 2-yr note yield jumped 22 basis points to 4.97% and the 10-yr note yield climbed 19 basis points to 4.56%.
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: March PPI (Briefing.com consensus 0.3%; prior 0.3%), Core PPI (Briefing.com consensus 0.2%; prior 0.6%), Weekly Initial Claims (Briefing.com consensus 218,000; prior 221,000), and Continuing Claims (prior 1.791 mln)
- 10:30 ET: Weekly natural gas inventories (prior -37 bcf)
Commodity prices boost energy sector
10-Apr-24 15:05 ET
Dow -568.56 at 38315.11, Nasdaq -202.83 at 16103.81, S&P -66.94 at 5142.97
[BRIEFING.COM] The major indices moved slightly lower in recent action with no specific catalyst. The equal-weighted S&P 500 is down 2.0% and the market-cap weighted S&P 500 is down 1.3%.
The S&P 500 energy sector is going against the grain, trading 0.2% higher. This price action is related to the movement in commodity prices. WTI crude oil futures are up 1.2% to $86.26/bbl and natural gas futures are up 0.5% to $1.88/mmbtu.
Elsewhere, Treasuries remain near intraday highs. The 10-yr note yield sits at 4.55%.
Minutes shows cut due this year; March deficit shrinks as gov't lapses 2023 bank default payments
10-Apr-24 14:30 ET
Dow -519.09 at 38364.58, Nasdaq -182.33 at 16124.31, S&P -59.34 at 5150.57
[BRIEFING.COM] The major averages have jostled around in the last half hour following the release of the FOMC minutes and the March Treasury Budget which showed interest on the public debt continues to be a large line item, even while the gov't lapsed large bank default rescue payments on its outlays from the year prior (Silicon Valley Bank, First Republic, Silvergate Bank, Signature Bank); to this point, the S&P 500 (-1.14%) is in second place.
The Treasury Budget for March showed a deficit of $236.5 bln versus a deficit of $378.4 bln a year ago. The Treasury Budget data is not seasonally adjusted, so the March deficit cannot be compared to the deficit of $296.3 bln for February.
The total year-to-date budget deficit now stands at $1.06 trln vs $1.10 trln at this point a year ago.
Elsewhere, the FOMC minutes highlighted that, in light of current economic conditions, the outlook for economic activity and inflation, and the balance of risks, it was appropriate to maintain the target range for the federal funds rate at 5¼ to 5½ percent. Participants also agreed that it was appropriate to continue the process of reducing the Federal Reserve's securities holdings.
Further, in discussing the policy outlook, participants judged that the policy rate was likely at its peak for this tightening cycle, and almost all participants judged that it would be appropriate to move policy to a less restrictive stance at some point this year if the economy evolved broadly as they expected. In support of this view, they noted that the disinflation process was continuing along a path that was generally expected to be somewhat uneven.
Gold pressured by yield, dollar strength ahead of minutes, budget
10-Apr-24 13:55 ET
Dow -545.87 at 38337.80, Nasdaq -187.99 at 16118.65, S&P -62.42 at 5147.49
[BRIEFING.COM] The major averages have held their lower lines ahead of both the FOMC minutes from the March. 19-20 meeting as well as the monthly treasury budget, which are due at the top of the hour. The tech-heavy Nasdaq Composite (-1.15%) is today's shallowest laggard, albeit down 188 points.
Gold futures settled $14 lower (-0.6%) to $2,348.40/oz, pressured by a stronger greenback and yields.
Meanwhile, the U.S. Dollar Index is up about +1% to $105.16.
PriceSmart rapidly retreats from 52-week highs following Q2 results; long term remains bright (PSMT)
PriceSmart (PSMT -4%), the membership warehouse club operator across Central and South America, started off at 52-week highs today before rapidly retreating, taking out March and April lows. Better-than-expected Q2 (Feb) earnings and sales figures, a healthy jump in same-store sales, and a one-time $1.00 special dividend provided more than enough for investors to buy in. However, the initial pop on relatively low volume proved unsustainable once the market opened today, indicating that PSMT's Q2 results were ultimately uninspiring, especially after an over +30% run since November.
- PSMT registered accelerating revenue growth of 13.1% yr/yr to $1.29 bln compared to a +10.6% in Q1 (Nov) supported by an +8.8% improvement in comparable net merchandise sales. Membership income ticked 14.6% higher yr/yr, underscoring solid membership growth as shoppers emulate American behavior, hunting for the best values in light of an inflationary environment. For comparison, Costco (COST) reported an 8.2% bump in membership fee income yr/yr in FebQ.
- However, sales may have been able to be even higher. Management noted some challenges in meeting outsized demand during December, a prime selling month. While PSMT stated that additional expenses incurred to meet the demand were unlikely, investors may be disappointed by PSMT's inability to fully capitalize on what is typically one of its best months of the year.
- Meanwhile, gross margins slipped by 30 bps yr/yr to 15.7%. PSMT chalks up the compression to the removal of a COVID premium from pricing and a reduction in liquidity premiums for items sold in Trinidad.
- Still, PSMT delivered a solid 4.8% improvement in its EPS yr/yr to $1.31, supported by better-than-expected revenue growth. Average sales ticket grew by 2.7% and transactions by 10% yr/yr on a minor dip in average items per basket, underscoring ongoing inflationary pressures in PSMT's regions.
- PSMT's store expansion plans are also progressing nicely, purchasing land for its ninth club in Costa Rica. Once built, it would be the 55th store for PSMT, a roughly 10% bump compared to the year-ago period.
Overall, PSMT stitched together a decent quarter. However, given the inflationary pressures across the company's markets, investors would have liked to see more robust revenue growth. Meanwhile, challenges during the holiday season dampened the lively mood during the pre-market session. Nevertheless, PSMT is primed to maintain its broader upward trend, especially given how much the inflationary backdrop has spurred value-seeking behavior. It was also encouraging to see PSMT declare a special dividend, underpinning confidence in its future cash flows.
Hexcel dives lower after announcing surprise leadership change (HXL)
Hexcel (HXL), a manufacturer of light-weight components used in aircraft production and space and defense applications, is plunging lower after announcing a surprise change at the top, appointing Tom Gentile as its new CEO. He will replace Nick Stanage on May 1, who will transition to an Executive Chairman role. In the press release, HXL also reaffirmed its FY24 guidance, which called for EPS of $2.10-$2.30 and revenue of $1.925-$2.025 bln, but that is doing little to calm investors' jitters.
There are a couple reasons why we believe this leadership transition is sparking a selloff today.
- First, although HXL stated that the change follows a comprehensive succession process, the company never signaled to market participants that it was considering a change at the top. Therefore, the move is catching investors' off-guard and creating some anxiety regarding the direction of the business.
- Second, the fact that Mr. Gentile is coming over from troubled Spirit AeroSystems (SPR), where he served as President and CEO from 2016-2023, isn't overly comforting for investors. As many are aware, SPR is a major supplier for Boeing (BA), providing the aircraft manufacturer with fuselages and other components.
- SPR's deep troubles are intertwined with BA's, which announced its own management shake-up on March 25 when Dave Calhoun stepped down as CEO and Board Chair Larry Kellner disclosed that he doesn't intend to stand for reelection.
- Essentially, the concern is that Mr. Gentile will bring SPR's issues over to HXL. On that note, Texas Attorney General Ken Paxton opened an investigation into SPR related to reoccurring problems with certain aircraft parts provided to BA. That followed a six-week audit by the FAA that found multiple instances in which SPR and BA failed to comply with manufacturing quality control requirements.
- On the other hand, Mr. Gentile's familiarity, experience, and business relationships across the aircraft manufacturing industry and its supply chain could be an asset for HXL. The Commercial Aerospace segment, which accounted for nearly 60% of HXL's Q4 revenue, is a major supplier to both BA and Airbus (EADSY).
- Unsurprisingly, BA's production woes for its 737 Max jets have created a strong headwind for HXL's Commercial Aerospace segment. Total narrowbody sales declined on a yr/yr basis in Q4, due to declines in the 737 Max and EADSY's Airbus A320neo programs.
- The good news is that demand for narrowbody planes, including for the 737 platform, remains robust and once BA works through its Max issues, HXL should be positioned to capitalize on rising production ramp up rates.
The main takeaway is that HXL's leadership change was sudden and unexpected and is catching investors by surprise. Given all the negative publicity surrounding SPR, the decision to bring on the company's former CEO as the new head of HXL isn't going over well, but that may ultimately prove to be short-sighted. Looking over Mr. Gentile's entire tenure as SPR's CEO, the company was performing quite well before the pandemic and BA's troubles hit, as illustrated by the stocks near 50% gain from the beginning of 2016 through the end of 2019.
Delta Air Lines' strong Q1 report and outlook eases concerns of slowing travel demand (DAL)
Delta Air Lines (DAL) set a bullish tone for the airline industry as the Q1 earnings season approaches, delivering a top and bottom-line beat while issuing an upbeat outlook, easing concerns that travel demand is softening after a two-year boom period. To the contrary, demand across DAL's business lines -- domestic, corporate, and international -- remained quite healthy, and strengthened in some areas, helping to offset rising fuel costs.
- Rewinding to last quarter, domestic unit revenue decreased by 4%, which put slowing growth concerns squarely on the radar. That issue, combined with disappointing FY24 guidance that called for EPS to grow by just 4%, sent shares spiraling lower. In Q1, though, domestic unit revenue (TRASM) rebounded and hit a new March quarter record, increasing by 3% yr/yr with record load factors.
- Meanwhile, corporate travel continues to accelerate as managed corporate sales jumped by 14% yr/yr, fueled by strength in large corporate accounts in the technology, consumer services, and financial services categories. There's no slowdown in sight, either, based on a recent corporate survey cited by DAL that indicates about 90% of companies expect their travel volumes to increase or remain steady in Q2 and beyond.
- A key advantage that DAL holds over low-cost and ultra low-cost carriers such as Southwest Airlines (LUV), Frontier Group Holdings (ULCC), and Spirit Airlines (SAVE), is its substantial international business, which accounted for 28% of total Q1 passenger revenue. Once again, demand for this more profitable business was solid as international passenger revenue grew by 12% yr/yr, although that is down from Q4's growth of 25%. Also, TRASM did decrease by 3% due to 16% higher capacity, particularly in the Latin and Pacific markets.
- Overall, though, TRASM was down by just 0.7%, coming in at the high end of DAL's guidance of flat to down 3%. There are some concerns that DAL's intention to ramp up capacity will push ticket prices and TRASM lower, but that didn't really come to fruition in Q1.
- Turning to costs, non-fuel CASM increased by a slower-than-expected pace, up by just 1.5%, reflecting strong operational execution. Looking ahead, DAL expects to keep a tight lid on costs, forecasting a low single-digit increase in non-fuel costs for FY24.
- If there is a blemish, it's that DAL opted to merely reaffirm its FY24 EPS guidance of $6.00-$7.00, despite topping Q1 EPS estimates and targeting at least $4 bln in debt repayments this year. The company may be taking a cautious approach with its outlook given the persistent macro-related headwinds, as well as the recent upswing in fuel costs.
The main takeaway is that DAL demonstrated yet again why it's considered to be the premier name within the airline industry as it capitalized on sturdy travel demand while delivering strong operational execution. DAL's better-than-expected performance is a positive sign for the airline industry, but the impressive results within its corporate and international businesses are key distinguishing factors relative to some of its competitors.
SMART Global's Q2 performance too dim following an over +40% run YTD ahead of results (SGH)
SMART Global (SGH -19%) surpassed earnings estimates in Q2 (Feb) while registering revenue consistent with analyst projections and issuing in-line Q3 (May) guidance. However, against the backdrop of an over +40% run leading into its Q2 report, SGH's performance was relatively dim, driving today's sell-the-news reaction.
SGH splits its operations into three distinct segments: Intelligent Platform Solutions (IPS), which centers around AI and high-performance computing; Memory Solutions, which focuses on memory chips; and LED Solutions, SGH's LED product division. There were not too many glaring issues from the quarter, but rather several nitpicks, which is reasonable given how much shares of SGH rose over the past three months.
- AI demand has only accelerated in 2024, with adoption unfolding across larger enterprises instead of purely early adopters, boosting SGH's IPS segment, which enjoyed 19% sequential revenue growth to $141.41 mln and comprised half of the company's total revs of $284.82 mln. SGH focused on sequential growth in the quarter following the divestiture of its SMART Brazil operations, which was completed in late November.
- However, the market expected stronger IPS growth, especially given the current state of AI demand. Additionally, SGH touched on its customers' continued challenges in deploying AI. While management was confident it could help tackle this problem, it underscores a lingering issue with AI at the moment. IT consulting giant Accenture (ACN) discussed a similar trend last month, noting that its clients are struggling to scale AI given the complexities surrounding the additional investment in infrastructure needed to utilize the technology properly.
- Meanwhile, Memory revs declined around 2% qtr/qtr to $83.30 mln due to ongoing excess inventory woes at several SGH's larger customers. While management continues to observe signs of the memory cycle turning around, near-term unit demand remains problematic across some of its enterprise customers. SGH continues to expect a 2H24 (Aug) rebound, but the continuous inventory adjustments are slightly concerning.
- LED Solutions remains a laggard, as anticipated, slipping by around 13% sequentially to $60.11 mln, primarily due to seasonality. The LED demand environment remains muted, prompting SGH to manage its operations prudently. Still, the company remains optimistic that demand trends will pick up next quarter, projecting a moderate sequential revenue increase.
- Despite surging AI demand, SGH continues operating in a turbulent environment, keeping a fairly wide range in its Q3 earnings and revenue predictions. The company expects adjusted EPS of $0.15-0.45, a $0.03 lift at the midpoint compared to its $0.27 posted in Q2, and revs of $275-325 mln, representing a possible sequential drop.
SGH has acted as a decent leading indicator ahead of the past few earnings seasons. AI will likely remain a meaningful tailwind for big tech firms, while companies that are more exposed to the memory industry will see another quarter of inventory adjustments. However, if SGH's AI-centered peers deliver more robust sequential revenue growth, it would underpin a weakening competitive edge for the company, a potentially alarming development.
WD-40 heads lower following earnings and decision to sell non-core segment (WDFC)
WD-40 (WDFC -5%) is trading lower today despite reporting EPS upside with its Q2 (Feb) earnings results last night. While most people know WDFC for its namesake WD-40 brand, it sells other Maintenance Products (GT85 and 3-IN-ONE) as well. WDFC also sells home cleaning products (X-14 mildew stain remover, 2000 Flushes, Spot Shot, Carpet Fresh), but it's a much smaller segment of overall sales.
- Its earnings report was not the only big news. WDFC also announced that it has decided to pursue a sale of its US and UK Homecare and Cleaning Products portfolio. This will allow WDFC to focus on its core, higher-margin maintenance products while also creating headspace for future innovation.
- Let's start with earnings. EPS fell 6% yr/yr to $1.14, but that was still modestly better than analyst expectations. Revenue rose 6.8% yr/yr to $139.1 mln, which was generally in-line. WDFC has little analyst coverage, so we do not put a lot of weight on the comparisons to consensus, but they were generally in-line to modest upside.
- Importantly, WDFC went live with the first, and most significant phase of its ERP system in Q2. ERP implementations have tripped up some companies by causing production/delivery mishaps. WDFC said that strong demand in sales growth throughout the US more than offset the short-term impacts the ERP implementation had on sales.
- For the second consecutive quarter, WDFC saw sales growth across all trade blocks. The company remains encouraged that the improvement in trends experienced in the second half of FY23 have carried into the first half of FY24, including the continued expansion of gross margin on a yr/yr basis. The margin expansion will allow WDFC to spend more on advertising and promotional activities.
- Probably what stood out most was WDFC raising FY24 EPS guidance pretty substantially to $5.00-5.30 from $4.78-5.15 despite the modest Q2 beat. We interpret that as nice guidance upside for the second half of the fiscal year. WDFC reaffirmed its full year revenue outlook of +6-12%.
Overall, we are a bit surprised the stock is lower on pretty decent Q2 results. Perhaps investors would have liked to have seen revenue guidance taken higher given the EPS guidance increase. Or perhaps the decision to sell the US and UK Homecare and Cleaning Products portfolio is not sitting well with investors. However, it sounds like a sale would add a nice boost to margins and allow WDFC to focus on its core business.
First quarter earnings reporting period will be a breathing exercise
Your ears don't deceive you and neither will your eyes in due course. Hard as it might be to believe with the fourth quarter earnings reporting season wrapping up not that long ago, the coming week will feature the start of the first quarter earnings reporting period.
It will be a relatively slow start, but the reporting cadence will pick up starting in the third week of April and continuing until mid-May. By then, market participants will have a good line on the results for the March quarter and how companies expect the coming months to unfold for the economy and their earnings prospects.
Here we are reminded that the stock market is not the economy; however, economic activity drives earnings, and earnings (and earnings expectations) drive the stock market. There is no escaping that, which is why every earnings reporting period starts with an inhale and typically (but not always) ends with an exhale.
An Uncommon Development
The fourth quarter reporting period warranted its share of breathing exercises. It didn't get off to a great start. When we penned our preview of that period in mid-January, the blended fourth quarter earnings growth rate (combines actual results with estimates for companies that have yet to report) was 0.4%. On January 26, it stood at -1.4% (inhale).
When the fourth quarter reporting period ended, the earnings growth rate had settled at 4.3% (exhale).
So, where does the first quarter blended earnings growth rate stand today? It is at 2.9%, according to FactSet. That is down from 5.8% on December 31.
It is not uncommon for the earnings growth rate estimate to be reduced ahead of the reporting period. What is uncommon about this reporting period is that analysts haven't reduced earnings estimates as much as they normally do.
According to FactSet, the median bottom-up estimate for the first quarter decreased by 2.5% between December 31 and March 27 versus an average decline of 3.7% over the past 20 quarters.
It is understandable why the estimate cuts haven't followed form with the historical average. The main reason is that the economy hasn't followed form with the history of a tightening cycle. It has continued to defy expectations that the impact of the so-called lag effect of prior rate hikes would hit more forcefully.
Remarkably, the economy has shown signs of strengthening. Real GDP increased 3.1% in the third quarter, 3.3% in the fourth quarter, and is projected in the Atlanta Fed GDPNow model to grow 2.5% in the first quarter. The overarching point is that there is no contraction evident in those figures, or any substantive slowdown, despite the Fed raising rates 11 times between March 2022 and July 2023.
Estimates Holding Up
We would venture to say, then, that there is optimism in front of the first quarter earnings reporting period. One could stake a claim on that assertion by pointing to the S&P 500 closing at a record high at the end of the first quarter while interest rates were going up.
The interest rate increase was a byproduct of the stronger-than-expected economic data, as well as some sticky inflation data that forced the market to rethink its outlook for Fed rate cuts.
In brief, the year began with an expectation for six cuts by the end of the year. The current expectation is that there will be three rate cuts by the end of the year. Market pricing, however, is entertaining the idea that there might only be two rate cuts, and, alternatively, there have been assertions from some Fed officials that there might be no rate cuts if progress on inflation stalls.
The good news is that there has been no stalling in the economy, which is why earnings estimates have held up as well as they have, not only for the first quarter, but for the calendar year and forward 12-month period as well.
The market has been excited by that and has arguably run ahead of the good earnings news embedded in consensus estimates. Hence, there has been multiple expansion, which is to say stock prices have seen a bigger percentage increase than earnings estimates have. To wit: the S&P 500 has surged 9.4% since the start of the year while the forward 12-month EPS estimate has increased by only 3.2%.
The Trend Has Been the Market's Friend
The earnings estimate trend, though, has remained the market's friend. With the market-cap weighted S&P 500 sporting a premium valuation, it is important that relationship stays on good terms.
So, in connection with the first quarter reporting period, the quantitative and qualitative guidance coming out of it will carry a lot of weight with respect to moving the market. Optimism is high, but so is the bar in terms of valuation.
Guidance disappointments will be dealt with prudently by the market, and, in some cases, quite rudely as the benefit of living up to higher growth expectations gets ripped away.
The attention to guidance will be most acute in the higher-growth pockets of the market, namely the information technology and communication services sectors, as well as in the cyclical corners of the market, namely the industrials, materials, and consumer discretionary sectors.
The banks do not tend to provide much in the way of specific earnings guidance, but their qualitative assessment of loan demand and loan quality, coupled with their provisions for loan losses, will offer some meaningful perspective on economic conditions.
Before the guidance, though, comes the actuals for the first quarter.
FactSet informs us that the projected earnings growth in the first quarter will be provided by the information technology (3.68 percentage points), communication services (1.67 percentage points), consumer discretionary (1.05 percentage points), utilities (0.64 percentage points), financials (0.13 percentage points), and real estate (0.13 percentage points) sectors.
The remaining five sectors are all expected to subtract from earnings growth. The energy sector (-2.31 percentage points) is estimated to be the biggest drag followed by health care (-1.16 percentage points).
What It All Means
That, of course, is how things stand today (inhale). These projections will all change in the ensuing weeks. Some will move up and some will move down. Presumably, if history is any guide, the final tabulation will result in first quarter earnings growth for the S&P 500 that is at least two percentage points higher than the 2.9% growth rate projected today (exhale).
If the stock market wants some breathing room, though, as it works its way through the second calendar quarter, then the guidance during the first quarter reporting period can't be a choking hazard. That would take the market's breath (and maybe its breadth) away.
-- Patrick J. O'Hare, Briefing.com
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