The Market Bull – July 12, 2019
The major averages finish with decent gains. For the week the Dow closed above 27,000 for the first time. Same for the S&P 500 above 3,000. Party like its 1999. Since Monday the Standard and Poors 500 Index is up 34 points or 1.14%, while the NASDAQ has increased 131 points or 1.61%.
The June Producer Price Index or PPI advanced .1% on large gains in services and food prices, the latter driven by a nearly 20% jump in Corn prices compliments of the Midwest flooding earlier this year. Core Goods inflation has been absent for 3 straight months. On a year ago basis the PPI slipped to just 1.6% well below the Fed’s 2% target.
S&P 500 Earnings Per Share or EPS expectations for the 2nd quarter are expected to decline 3%. A close look at the data shows that companies are more likely to post a small earnings gain rather than a decline. Over the past five years on average, actual earnings reported by S&P 500 companies have exceeded estimated earnings by 4.8%. During this same period, 72% of companies in the S&P 500 have reported actual EPS above the mean EPS estimate on average. As a result, from the end of the quarter through the end of the earnings season, the earnings growth rate has typically increased by 3.7 percentage points on average (over the past 5 years) due to the number and magnitude of upside earnings surprises. This implies earnings growth of 1%, while positive would represent a very anemic result.
Standard and Poors 500 Index closed at: 3,013.77 up 13.86
NASDAQ finished the day: 8,244.14 up 48.10
Gold ended trading at: $1,417.00 up $10.30