DOW – 48 = 17,051
SPX – 4 = 1973
NAS – 7 = 4424
10 YR YLD – .01 = 2.47%
OIL + 1.46 = 104.59
GOLD + 1.30 = 1313.20
SILV + .04 = 21.03
First leg:
Let us start with earnings reporting season, which kicks into full gear this week with 140 of the S&P 500 companies posting results.
Netflix reported a profit of $71 million, or $1.15 a share, on revenue of $1.34 billion. This was in line with expectations, but for Netflix, an important component is how fast they are adding subscribers; turns out – fast; 1.69 million new net streamers in the second quarter; 570,000 in the US and 1.12 million international subscribers; now topping 50 million worldwide.
Allergan, the botox company, posted better than expected 2Q profits and sales but also announced it is cutting 1,500 jobs in a restructuring. BB&T, the southeastern financial company, posted weak 2Q results as mortgage activity lagged; this has been a theme among banks for the second quarter, but the bigger banks have been compensating with profits in investment banking and trading; smaller, regional banks find it harder to compete in that arena. Chipotle Mexican Grill, theme park operator Six Flags, oilfield services company Halliburton, Manpower Group, and chipmaker Texas Instruments all reported better than expected results.
Tomorrow we will get the earnings report from McDonalds; after the close, we will get earnings from Microsoft and Apple. Wednesday’s results include Facebook. Thursday we will hear from General Motors and Amazon.com.
So far, earnings season has been strong, of the S&P 500 companies that reported through the end of last week, earnings are up 7.6% from the same period last year on 4.2% higher revenues, with 65.9% beating EPS estimates and 68.2% coming out with better than expected revenue. This is better performance than we have seen at this stage in other recent reporting cycles. The +7.6% earnings growth at this stage in Q2 compares to an earnings decline of -3% for the same group of companies in Q1 On the revenue side, the +4.2% growth thus far compares to growth rates of +1.7% and +3% in Q1. The earnings and revenue beat ratios for these companies are similarly tracking better relative to Q1.
Second leg:
Israel and Hamas continue to battle in the Gaza Strip and Russian separatists continue to impede Malaysia Airlines Flight 17 investigation efforts. President Obama delivered a statement this morning on the geopolitical hotspots. Secretary of State John Kerry was dispatched to Cairo to discuss cease-fire negotiations with international officials. Though Obama cited Israel’s “right to defend itself†against Hamas missile strikes that now number in the thousands, he said he has instructed Kerry to prioritize de-escalation.
