The latest quarterly financial results from S&P 500 companies reveal a "fairly robust" increase in earnings as the reporting season nears its conclusion, as stated by Oppenheimer Asset Management on Monday. As of Friday, nearly 463 companies within the benchmark equity index have announced their results, showing earnings up by 8.5% year-over-year alongside a revenue growth of 4.8%.
Chief Investment Strategist John Stoltzfus at Oppenheimer Asset Management noted that companies have consistently surpassed analyst expectations, indicating a trend where results have "surprised to the upside." Excluding materials and industrial sectors, all S&P 500 sectors reported year-over-year increases in their earnings, with health care leading the charge with a remarkable 17% jump, closely followed by consumer discretionary with a 16% rise.
Additionally, sectors such as utilities and financials also demonstrated significant double-digit percentage increases in earnings. On the sales front, both energy and health care sectors recorded annual gains exceeding 7%, while only the industrials and materials sectors witnessed declines, according to the report. Looking ahead, only 15 companies are slated to report earnings this week, with an additional 16 scheduled for the subsequent week.
Noteworthy among these is Palo Alto Networks ($PANW), which is set to report after Monday's closing bell. Other companies that will soon disclose their results include Intuit ($INTU), TJX ($TJX), Lowe's ($LOW), Analog Devices ($ADI), and Target ($TGT). The market will also focus on the remarks made by Federal Reserve Chair Jerome Powell at the annual economic symposium in Jackson Hole, Wyoming, on Friday.
These remarks are anticipated to be crucial as speculation mounts regarding the possibility of a reduction in the benchmark lending rate by as much as 50 basis points in the upcoming month, Stoltzfus indicated. Current market conditions suggest a roughly 78% probability that the Federal Open Market Committee (FOMC) will implement a 25 basis points interest rate cut in September, although there remains a significant probability in favor of a more aggressive 50 basis points reduction, according to insights from the CME FedWatch tool. Stoltzfus commented, "With many stakeholders now looking towards a 50 basis point cut in September, any hesitancy reflected in Powell's comments could potentially reintroduce volatility into the market as we approach the weekend." Since March 2022, the FOMC has tightened its monetary policy by a total of 525 basis points through July 2023 but has recently opted to keep interest rates steady, marking its latest pause late last month. Offering an outlook, Stoltzfus projected that a 25 basis point cut is more plausible, given the indicators from last week's jobless claims data and the advance retail sales report, which highlighted underlying economic resilience.
"The data suggests sufficient positive momentum in the economy, leading us to believe that the Federal Reserve may feel more confident in pursuing a more modest cut of 25 basis points in September, while still preserving the option for an additional cut in November or December," he explained. Any implications from Powell hinting at a lack of monetary easing in September might trigger a "tantrum reaction," particularly from investors with high leverage, Stoltzfus cautioned.
Conversely, a more aggressive cut of 50 basis points could stoke fears that authorities believe they have delayed easing for too long and need to act significantly to avert a recession, Stoltzfus concluded..