Markets charged up to record or near-record highs Friday ahead of the French election. Now the vote is over, earnings are 80% finished, and the jobs report is out of the way, swinging the focus to quarterly results from retailers and inflation data.
For the moment, stocks appeared to have a slightly lower bias, perhaps a sign of some profit taking after the election results came in to the market’s apparent liking. As was the case with Brexit and the U.S. election last year, the ultimate market impact of the French election might take a little time to play out, but a win by the centrist candidate appears to lessen concerns about the euro, which dropped slightly vs. the dollar early Monday.
European and Asian stocks were mixed overnight, but the one big story was Japan’s Nikkei, which rose 2.3% to 18-month highs. April trade data from China looked a bit light, however.
Economic data perks up tomorrow with the government’s March Job Openings and Labor Turnover Survey (JOLTS), as well as March wholesale inventories. Last Friday’s employment report seemed to ease concerns about recent soft economic numbers, but some big numbers are on tap for later this week including the producer price index (PPI), the consumer price index (CPI), and retail sales.
Retailers take the earnings spotlight this week and next (see below). So far, the biggest year-over-year earnings per share gains in Q1 come from financials (19.3%), materials (19%), technology (17.9%), and health care (6.6%). Telecom is the only sector to see earnings fall from a year earlier.
Those earnings gains don’t include energy, which is up 647% from steep losses a year ago. There’s concern, however, that weak oil prices this quarter could put energy earnings back under pressure as the months move along. Crude traded slightly lower Monday despite talk that OPEC might extend its production cuts.
About 40 more S&P 500 companies report earnings this week, and so far, 67% have beaten Wall Street analysts’ estimates for revenue growth, compared with a five-year average of 53%. Revenues are up 7.6% for the quarter, compared with estimates for 6.9% going into earnings season. These are healthy numbers and signal that despite any soft economic data, the earnings engine seems to be running smoothly and efficiently. The strong jobs report Friday was another positive economic sign.
Two Fed speakers took the microphone this morning as St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester discussed the economy and interest rates. It’s a month until the next Fed meeting, and the jobs report helped solidify expectations for a hike by June. Odds now stand at 83%, according to Fed funds futures.