Trade War Risk to be Offset by US Q2 Earning Season

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Equity Analysis and News

  • Optimismover US earning season could support indices
  • S&P 500earnings growth expected to be over 20%.

Technical Analysis on Dow Jones and S&P 500, click here

Earning Season Begins

US earning season is set to officially begin today with 4 large US banks (Citigroup, JP Morgan, Wells Fargo and PNC Financial) due to release their latest financial results for the second quarter. Optimism over the upcoming earning season has provided a helping hand to equity markets, which quickly rebounded from the latest escalation in the US-China trade war saga, whereby the US announced a decision to place tariffs on $200bln worth of Chinese goods.

Today’s Earnings Schedule

Company

Market Cap

Time of Release

Expected EPS

Expected Revenue

PNC Financial (PNC)

$64bln

10:35GMT

$2.58

$4.26bln

JP Morgan (JPM)

$353bln

10:45GMT

$2.22

$27.36bln

Wells Fargo (WFC)

$270bln

12:00GMT

$1.12

$21.71bln

Citi (C)

$170bln

12:00GMT

$1.57

$18.49bln

*Implied volatility is expected to be around 2-3%. In the past 8 quarters, JPM has been down 5/8, C down 6/8, WFC down 7/8.

At the last earning season, US corporate results had reached its best level in over 7 years with earnings growth of 24.8% and revenue gain of 8.7%. This trend is set to continue for this season with S&P 500 earnings growth expected to be above 20% again, given the backdrop of strong economic growth in the US and a boost from the Trump administrations tax overhaul continuing to support US corporate names and boost confidence.

Tech Names Outperform

Since the end of Q1, the NASDAQ 100 had been the best performing US index amid the rally in the tech sector, while the S&P 500 had also been supported by tech names, alongside energy companies, given the surge in oil prices to around 4-year highs. The DJIA however, had only seen a modest gain as the index felt the weight from industrial names in light of trade wars.

US STOCK MARKET PERFORMANCE SINCE Q1

Trade War Risk to be Offset by US Q2 Earning Season

(Created on ProRealTime)

Earnings vs Trade Wars

If indeed US corporate results exceed expectations this could provide a nice distraction for equity traders and continue to buoy major equity markets. However, with trade wars continuing to unnerve investors and placing pressure on appetite for risk, a slew of soft financial results in which company forecasts are dampened by the prospects of a full-scale trade war, could limit demand for stocks, consequently resulting in a pullback in indices.

BACKGROUD ON TRADE WAR

US China Trade War & a Brief History of Trade Wars – 1900 until Present

RESOURCES FOR FOREX & CFD TRADERS

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX