My guess is the market has found its range. It is now trading in the range, and whether it breaks out either way depends now on earnings, all things being equal, meaning, Yemen does not blow up, Ukraine does not flair up, or the EU does not give up on Greece.
Oil, of course, is a player in the earnings scenario because the energy sector is such a huge part of the overall earnings game. And that sector is not slated to do well this earnings quarter. In fact, the overall projection for Energy earnings is -45%, more or less, and it does not get much better for rest of 2015.
So, overall, the earnings projections are targeting -4.6% for this quarter, thanks to Energy.
- Brent crude oil steadied around $63 a barrel on Tuesday, not far below the 2015 high, supported by worries that a civil war in Yemen could destabilize the Middle East, affecting oil supplies.
Even with the 15% uptick in oil this month, the earnings will not be good for the Energy sector, but without that negative drag, the earnings might actually move to the positive. Well, they could do that anyway, given the propensity of consensus opinion to be incorrect just about all the time.
As to earnings and the market … I read an article on TraderPlanet.com this morning (Worry No Worry – Earnings Growth Will Prevail ) that backs up what I say all the time in my writing about the market – earnings are the name of the game.
- I could go on and on about how the economic trends are still pointing to growth, or about how the FOMC rate hike has been expected for so long it has no choice but to be factored into current market values, but I won’t. When you boil away all the day-to-day information that drives near-term stock market prices, what you have left with is earnings. Earnings are what drive investors to buy or sell their shares …
Yup, Michael Hodges (the writer of the article) says it well and correctly. As well, he also goes on in that article to analyze the earnings thoroughly, and in the end, giving a perspective that is reasonable and persuasive for market watchers.
- There may be corrections and there may be one caused by the Fed, but I think it will be nothing more than a great entry for profits. The Fed, the rate hike, the economic data, and, most especially, the international headlines are near-term factors in the market. The long-term fundamental picture is that the US economy is fixed. It’s not robust or even strong necessarily, but it is well on the way to full recovery and gaining momentum. It’s OK to be worried about earnings but don’t discount expectations and trends.
Yes, it is okay to be concerned (but not worried) about earnings, as they are the focus, as far as the market goes. It is also okay to keep in mind what Michael Hodges is saying – until the US economy shows any sign of changing the upward trend, make all long-term bets on earning, and earnings alone. So, for now, let’s see how earnings turn out this time, but, more importantly, let’s watch the leading indicators for the US economy to know how the market sees the future, not the past.
Trade in the day; invest in your life …
