Markets Weigh Earnings, Good Jobless Number

Markets Weigh Earnings, Good Jobless Number

It’s been a big week for corporate earnings and Thursday is the apex, with a barrage of reports including such major names as 3M, Amazon, Caterpillar, and McDonald’s.   



Markets Weigh Earnings, Good Jobless Number
Markets Weigh Earnings, Good Jobless Number

Caterpillar met expectations with earnings of $1.27 per share, but missed with its quarterly revenue and trimmed its full-year forward guidance for revenue, citing soft economic conditions in China and Brazil along with the strength of the dollar as challenges for the company.  Shares in Caterpillar were down more than 2% shortly after the opening

Fellow Dow component McDonald’s beat estimates with both earnings and revenue and the fast-food giant subsequently rose 1.3% in early trading. 3M topped estimates with its earnings, but came up shy on the revenue front and saw its shares dip more than 2%. Amazon, the e-commerce bellwether, is set to report its quarterly earnings after the closing bell on Thursday.

The mixed nature of the day’s earnings, particularly the declines in such heavy-hitters as Caterpillar and 3M, dragged the leading stock indices lower in early trading on Wall Street.  Shortly after the open, the Dow Jones was down 44 points or 0.24% at 17,807, the S&P 500 dipped 0.09% to 2112.2 and the NASDAQ 100 slid 0.01% to 4622.6.

Stepping back from the granularity of individual company results, the macro-economic picture is looking benign for the US, with more promising signs from the labor market. Initial jobless claims  plunged 26,000 last week to a much-better-than-expected 255,000. This time of year is when auto manufacturers choose to close factories for retooling and the unpredictability of the resultant temporary layoffs makes it hard to properly adjust the data for seasonality, meaning the data could be skewed somewhat, but nevertheless such a large dip in the sample week for the government’s monthly employment report points to the possibility of a strong result for July. 255,000 is the lowest weekly number recorded in over 40 years, though the four-week moving average of 278,500 is a little less striking.

The Chicago Fed’s national activity index for June also surprised to the upside, coming in with a reading of +0.08 versus a consensus estimate of -0.05 and rising from May’s upwardly-revised level of -0.08. The three-month average of -0.01 suggests that we’ve been through a stretch of below-trend growth, but the upturn in the level of the index for June will raise hopes that the economy is starting to gain traction as we move further into the summer months.

One area of the economy that has failed to pick up steam this summer has been manufacturing; we will get our first read at how things look at a nationwide level in July with the flash reading of Markit’s manufacturing PMI, which is released on Friday morning. The consensus estimate is for a reading of 53.7 which would be just a small improvement from June’s final level of 53.6.


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