Will Q2 Earning Be the Catalyst for New Highs?

Will Q2 Earning Be the Catalyst for New Highs?

Following yesterday's recovery from the overnight sell-off, we look for earnings to be the next catalyst in U.S. equity markets.

Will Q2 Earning Be the Catalyst for New Highs?
Will Q2 Earning Be the Catalyst for New Highs? Getty Images

Fear of a further drop in U.S. equity markets was short-lived during Wednesday’s session, with sellers unable to attack the overnight low and bulls pushing the equity indices back into Tuesday’s range. The markets are doing what they have always done, which is to adjust to new conditions.  Right now, that means adapting to the uncertainty surrounding the trade wars rhetoric.

Overnight, stock markets in both Asia and Europe rallied while the S&P 500 futures pushed back up near this week’s high. We continue to anticipate that the next few sessions will resemble summertime trading. That means quiet, low-volume markets with choppy ranges that often lead to a bullish bias. We think the gravitational pull right now is for the  ESU to push up to 2800.

The economic calendar today is busy, but other than the 8:30 Jobless Claims numbers, it does not feature much that is noteworthy as we don't expect those numbers to offer anything that is market-moving. Tomorrow's calendar features some important numbers early on - Import and Export Prices and Consumer Sentiment - but again, we do not anticipate these to be pivotal; and then in the first two days of next week, the calendar really slows down.

Given this, the calendar will be dominated by Q2 earnings reports.  Tomorrow, these include earnings from banks such as Citigroup, JP Morgan, and Wells Fargo, and the first two days of next week, the headline reports will come from Bank of America, Netflix, and Goldman Sachs.

Our view is to continue to buy dips in the S&P 500 futures, and our conviction will remain strong as long as the ESU18 remains above the 2750 level, which marked resistance last week. The big round 2800 level is vital now; we showed in yesterday's article that 2800 has offered firm resistance since the late January sell-off.

We believe that the dips will be shallow, and we look to buy any weakness. Tomorrow, with nothing important on the calendar after the first hour, we think traders will hit the exits early to take advantage of good weather in a summer that has been relatively busy in the financial markets.

Economic Calendar

Today:

  • Weekly Bill Settlement
  • Consumer Price Index 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 3-Month Bill Announcement 11:00 AM ET
  • 6-Month Bill Announcement 11:00 AM ET
  • 52-Week Bill Announcement 11:00 AM ET
  • 10-Yr TIPS Announcement 11:00 AM ET
  • Patrick Harker Speaks 12:15 PM ET
  • 30-Yr Bond Auction 1:00 PM ET
  • Treasury Budget 2:00 PM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET
  • Neel Kashkari Speaks 8:00 PM ET

Friday:

  • Import and Export Prices 8:30 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Fed Semiannual Monetary Policy Report »
  • Raphael Bostic Speaks 12:30 PM ET
  • Baker-Hughes Rig Count 1:00 PM ET

Monday:

  • Neel Kashkari Speaks 9:10 AM ET
  • 4-Week Bill Announcement 11:00 AM ET
  • 3-Month Bill Auction 11:30 AM ET
  • 6-Month Bill Auction 11:30 AM ET
  • TD Ameritrade IMX 12:30 PM ET
  • Consumer Credit 3:00 PM ET

Tuesday:

  • NFIB Small Business Optimism Index 6:00 AM ET
  • Redbook 8:55 AM ET
  • JOLTS 10:00 AM ET
  • 4-Week Bill Auction 11:30 AM ET
  • 3-Yr Note Auction 1:00 PM ET

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