More Earnings on the Tape

The equity markets were broadly higher last week on earnings and into the month end. The S&P 500 rose +1.0%.  The second quarter’s earnings season is underway. 2nd quarter GDP growth in the mid 2% surpassed low expectations.  Concerns about future interest rate policy’s both domestically and internationally (Japan) kept a lid on the weeks move higher in equities. Our Federal Reserve’s 25bps interest rate increase, while just a quarter of a percentage point, follows a pause in rate increases last month and led to more questions on what may be ahead for the Fed’s policy.

The S&P 500 benchmark ended the week at 4,582, up from the prior Friday’s closing price of 4,536. The index is now up +3% for July to date and up +19% year to date.

Communication services had the biggest increase, up +6.8%, followed by a +1.8% increase in materials and a +1.7% rise in energy. All lagging sectors year to date.  Other sectors that gained included technology, consumer discretionary, consumer staples and industrials.

Four sectors posted weekly declines last week as utilities shed -2.1%, real estate lost -1.8%, health care dropped -0.8% and financials fell –0.2%.

The gains in communication services were led by Facebook parent Meta Platforms (META) and Google parent Alphabet (GOOGL), which jumped +11% each.  Meta Platforms posted Q2 results that exceeded Wall Street’s estimates and issued stronger-than-expected revenue guidance for the 3rd quarter.  Alphabet/Google delivered Q2 per-share earnings and revenue that beat year-earlier results and market estimates as revenue growth accelerated in its search and YouTube businesses.

In the materials sector, International Paper (IP) gained +12% as the packaging and pulp company reported Q2 adjusted operating earnings per share above analysts’ mean estimate despite net sales coming in slightly below consensus.  In the energy sector, shares of Hess Corp. (HES) added +4.8%.

Decliners in the utilities sector included shares of Xcel Energy (XEL), which shed -3.6% on the week. The electricity company reported Q2 earnings per share as well as revenue below year-earlier results and analyst estimates.  In the real estate sector, shares of UDR (UDR) declined -7% as the multifamily real estate investment trust reported Q2 adjusted funds from operations and revenue below analyst estimates.

This is the busiest week for 2nd quarter EPS announcements.  This week’s earnings calendar includes Merck (MRK), Pfizer (PFE), Advanced Micro Devices (AMD), Caterpillar (CAT), Starbucks (SBUX), Apple (AAPL), (AMZN), ConocoPhillips (COP), and Berkshire Hathaway (BRK.A, BRK.B).

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Returns, Week Ending 7/28/2023 Chart