“Focus on the possibilities for success, not on the potential for failure”
It’s earnings season again…and with inflation, supply chain issues, geopolitical turmoil in Eastern Europe, the loitering by Covid 19, and interest rates on the rise…the temptation to focus on the potential for failure is difficult to ignore. It would be easy for there to exist a collective holding of breath as we anticipate the latest round of corporate earnings announcements.
And yet, there is something remarkable this season…if you look closely and focus on the possibilities for success. S&P 500 earnings estimates for 2022 have risen 2.2% this year to $228.50 per share (source FactSet) and given how difficult the operating environment is today that’s a pretty remarkable estimate. A word of caution. Estimates are exactly that…estimates; and they should be taken for what they are worth, but the fact that there is some level of data that suggests growth in these headwinds may be surprising and potentially encouraging to some.
As you help your clients to navigate today’s issues, it may help the conversation to keep the focus on the possibilities for success without ignoring the difficulties of the day. We’ve talked before about strategy abandonment and how staying the course can be difficult for some clients. Perhaps this outlook on the potential for successful earnings reports can provide them with better data for decision making.
On Friday, a sharp sell-off sent major stock market indices into negative territory for the week, capping a volatile close to April.
The Dow Jones Industrial Average declined 2.47%, while the Standard & Poor’s 500 tumbled 3.27%. The Nasdaq Composite index dropped 3.93% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 3.33%.1,2,3
Trading was volatile in the final week of April as investors struggled with the crosscurrents of global economic growth anxieties stemming from widening COVID-related lockdowns in China and a fresh batch of corporate earnings reports.
Monday set the tone for the week. Stocks staged an intraday reversal, wiping out a deep morning decline to end the day higher. After broad losses on Tuesday and a choppy session on Wednesday, stocks mounted a powerful rally Thursday thanks to positive corporate earnings reports, overcoming a disappointing first-quarter Gross Domestic Product report. Stocks could not sustain Thursday’s momentum, as Friday witnessed a broad-based retreat to cement another week of losses.
Following the torrid 6.9% annualized GDP growth rate in the fourth quarter, economists had expected economic growth to moderate to about a one-percent gain in the first quarter. Instead, the economy shrank at an annualized rate of 1.4%, dented by a slowdown in inventory investment by businesses, a jump in the trade deficit, and a decline in defense spending.
Consumer spending held up, rising 2.7%, though the gain was amid higher prices. Some economists expect the economy to resume its expansion for the remainder of the year, which may be one reason investors shrugged off the negative surprise.4
This Week: Key Economic Data
Monday: Institute for Supply Management (ISM) Manufacturing Index.
Tuesday: Factory Orders. Job Openings and Turnover Survey (JOLTS).
Wednesday: Federal Open Market Committee (FOMC) Announcement. Automated Data Processing (ADP) Employment Report. Institute for Supply Management (ISM) Services Index.
Thursday: Jobless Claims.
Friday: Employment Situation.
Source: Econoday, April 29, 2022
This Week: Companies Reporting Earnings
Tuesday: Advanced Micro Devices, Inc. (AMD), Pfizer, Inc. (PFE), Starbucks Corporation (SBUX), Marathon Petroleum Corporation (MPC), Skyworks Solutions, Inc. (SWKS), Prudential Financial, Inc. (PRU).
Wednesday: CVS Health Corporation (CVS), Twilio, Inc. (TWLO), Fortinet, Inc. (FTNT), eBay, Inc. (EBAY), Booking Holdings, Inc. (BKNG), Match Group, Inc. (MTCH).
Thursday: Block, Inc. (SQ), Illumina, Inc. (ILMN), Shopify, Inc. (SHOP), Pioneer Natural Resources Company (PXD), ConocoPhillips (COP), AnheuserBusch InBev (BUD), Albemarle Corporation (ALB), Vertex Pharmaceuticals, Inc. (VRTX), Kellogg Company (K), Air Products and Chemicals (APD).
Source: Zacks, April 29, 2022
Footnotes and Sources
2. The Wall Street Journal, April 29, 2022
3. The Wall Street Journal, April 29, 2022
4. CNBC, April 28, 2022
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