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Wall Street gears up for busiest earnings week in years

Published 04/22/2017, 11:31 AM
© Reuters. The Wall Street bull is seen in the financial district in New York
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By Caroline Valetkevitch

NEW YORK (Reuters) - Forget about French elections or the flagging Trump trade.

Corporate America is set to unleash its biggest profit-reporting fest in at least a decade next week, with more than 190 members of the S&P 500 index (SPX) delivering quarterly scorecards, according to S&P Dow Jones Indices data.

The lineup accounts for around 40 percent of the benchmark index's value, or more than $7.7 trillion, and includes big names like Google's parent Alphabet Inc (O:GOOGL), Amazon.com Inc (O:AMZN), Microsoft Corp (O:MSFT) and Exxon Mobil Corp (N:XOM).

The onslaught could keep U.S. stock investors' focus largely on earnings next week even as the world's attention is likely to be drawn elsewhere.

"That would be our hope," said Joe Zidle, portfolio strategist at Richard Bernstein Advisors in New York.

"A lot of people looked at this market and said it was the result of the Trump bump or the Hillary relief rally," while earnings have been rebounding, he said. "The faster earnings growth is underappreciated by investors."

Many strategists have attributed the 10 percent rally in the S&P 500 (INX) since Donald Trump's victory over Hillary Clinton in the Nov. 8 U.S. presidential election to optimism Trump would boost the domestic economy through tax cuts and an infrastructure spending binge.

The gains drove market valuations recently to their highest since 2004, even with little progress in Washington on the fiscal policy front. Meanwhile, other anxiety-provoking events have grabbed headlines, including unsettling relations with North Korea and this weekend's election in France, which has a bearing on the country's membership in the European Union and its currency, the euro.

Upbeat earnings from Morgan Stanley (N:MS) and other banks so far this reporting period cushioned those geopolitical worries, helping push the S&P 500 (SPX) up 0.9 percent this week, its best such performance in two months. Shares of smaller companies did even better, with S&P's benchmark indexes for small (SPCY) and mid-cap (IDX) stocks notching their best weeks of 2017, with gains of between 2 percent and 3 percent.

Expectations for the quarter's profit growth have risen as well, and the first three months of the year now appear set to mark the strongest quarterly earnings growth in more than five years. In the last week alone, expected S&P 500 first-quarter earnings per share growth rose to 11.2 percent from 10.4 percent, a more than 7 percent jump, according to Thomson Reuters data.

"This week definitely has proven that the Street likes earnings - it's controllable, it's U.S.," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

The reason for the slew of reports next week is anyone's guess, Silverblatt said, although recent holidays possibly played a role. Passover, Good Friday and Easter all fell in the previous weeks, which may have prompted some companies that typically report earlier to delay a week.

Just 76 companies reported this week compared with 134 in the comparable week a year ago, Silverblatt said.

Next week's rush will represent a 15 percent increase from the 166 S&P constituents that reported in the comparable week last year.

Thursday will be the busiest day with nearly 70 reports due, including updates after the closing bell from Alphabet, Amazon, Intel Corp (O:INTC), Microsoft and Starbucks Corp (O:SBUX).

© Reuters. The Wall Street bull is seen in the financial district in New York

That could make for a bang in the market on Friday, Silverblatt said, which is also the final trading day of April.

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