The opening week of earnings season has given Wall Street bulls plenty to celebrate, helping the S & P 500 hit new highs. Earnings season kicked off with the big banks, which mostly delivered positive results for the quarter. Continuing the strength in financials, Interactive Brokers and Charles Schwab moved higher on Friday after their earnings reports. Even some stocks that were falling after their reports, including Netflix and 3M on Friday, beat Wall Street expectations for the second quarter on the headline metrics. According to FactSet senior earnings analyst John Butters, 12% of S & P 500 companies have already reported their quarterly results. Of those, 83% have beaten Wall Street expectations for earnings per share, which is above the five-year average of 78%. The percentage of companies that have posted a positive revenue surprise is also 83%. Of course, expectations have fallen over the course of the year, so the beats aren’t necessarily as impressive as those in some prior quarters. Still, Michael Arone, chief investment strategist at State Street Investment Management, said the story of the first week of earnings season is “so far, so good.” That goes for the results themselves, as well as the outlooks and commentary from management. “There is an opportunity here for corporate executives to suggest, ‘hey, the outlook’s just too murky so we’re not going to provide that guidance.’ Yet I feel like not only has it been more optimistic than I would have thought — particularly from the big banks — but also a bit more clear. And then I’m surprised at the confidence or the conviction that they’re providing with that future guidance,” Arone said. .SPX 5D mountain The S & P 500 hit an intraday record on Friday. One thing helping earnings appears to be the weaker U.S. dollar, which can make earnings generated overseas look stronger to domestic investors. PepsiCo and Netflix were among the companies that have highlighted that change this week. Arone said that could continue to boost tech company results in particular as the earnings season progresses. One caveat is that earnings reports tend to be grouped by industry, and the stats and narrative can change as different sectors take their turn in the hot seat. Arone highlighted retailers as a group he is keeping an eye on. “The big retailers, they typically report later on in earnings season, so it will be interesting to see what they’re suggesting about consumer trends,” such as whether customers are trading down to cheaper goods, Arone said.
