Ticker Tape to be exact… With nearly half of S&P 500 companies reporting a trend is emerging…
Corporate earnings, as expected have surpassed expectations for 71% of companies reporting. Not surprising as expectations have been greatly lowered in response to economic data throughout the first quarter. What is more telling is that only 44% of companies are beating their revenue expectations, well below average. This step back in revenue is indicative of the impact currency has had on multi-national companies translating foreign revenues into less US dollars.
This soft 1st quarter revenue could be setting up a strong second quarter. In addition to setting up a strong opportunity for the 1st quarter of 2016.
Housing data was conflicting last week as existing home sales surged 6.1% and new home sales fell a staggering 11.4%. Percentages can often times be deceiving… Existing home sales increased 300K and new home sales fell 62K. A mere 20% in representation of existing home sales increases. The compounding issue associated with new home sales is the lack of construction jobs that get created from lower sales. Coincidentally initial unemployment data has trended north as of late. This fact has also alleviated concerns over inflation.
Around the globe manufacturing data has come in weaker over the last month. China, France, Germany, and the US all saw their Manufacturing data retreat, with China and France in contractionary territory. Likely we are seeing the impact currency changes have had on corporate revenues and as a result capital investments. This retreat should be expected and should be rewarded as expenditures are down and revenue will likely be up from Q1.
Brazil’s state run oil company, Petrobras, reported approximately $17B in costs associated with corruption. China decreased reserve requirement yet again, leading to the biggest decrease in reserve requirements ever for China. Germany saw much volatility as Economic sentiment fell. The concerns over Greece’s potential inability to pay debts and the potential for a “grexit” from the EU has shook consumer confidence in Germany. The concern is important as Germany represents the strongest EU economy.
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