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Second quarter is concluded, yet the stream of earnings reports is far from over. Certain tendencies can already be confirmed based on the current results.

The stock market has demonstrated promising dynamics during the last three months with major economic indices closing in the green. August can very well become a tricky month for the economy as July was exceptionally good. Month-over-month statistics can be less accurate, if not plain misleading.

The S&P 500 index has demonstrated a 9.7% growth year-to-date. The Nasdaq Composite has appreciated even more, growing 16.9% since the beginning of 2017. The Dow Jones is peaking at an all-time high level of 22 092 and is not expected to fall soon. Small caps have been growing at a much slower rate, yet still demonstrated positive dynamics.

55.3% of all companies reported higher than expected earnings and revenues

Oil prices could have been spotted moving in different directions over the course of the last three months. In the first half of the quarter both WTI and Brent crude were peaking at $52.38 and $55.23 respectively only to fall to around $45 in the end of June. Oil, however, rebounded on June 22nd and still continues to grow. Prices were seriously affected by recent advancements in US oil production. Since April 12th U.S. crude oil inventories have been falling with an exception of only two weeks.

The second quarter of 2017 was marked with overall favorable earnings picture, which can be attributed to deregulation policy of President Trump, positive economic expectations and ongoing recovery from the consequences of the global financial crisis. Interest rate hikes, carried out by the Fed, appear to be an additional confirmation of confident dynamics.

Latest Q3 growth estimates quote 4.7% as the most accurate figure

Major Economic Indicators

Major economic indicators did not disappoint the public, as well. GDP, new and existing home sales, as well as manufacturing PMI and consumer confidence in the United States have all been growing at rates that exceed analysts’ estimates. Europe, Australia and Japan demonstrate overall positive dynamics, though at sometimes slower rates than North America.

United States’ Manufacturing PMI, a closely watched measure of the American manufacturing activity, remained in the expansion zone — above the reading of 50 — but grew at a slower rate than in the very beginning of 2017. Unemployment in the United States fell to 4.3 percent, lowest since May 2001. More than 200 000 new jobs have been added for the second straight month in July. Wage growth, on the contrary, remains sluggish. Average hourly earnings are only 0.3% up in July.

Q2 Earnings

Over 330 companies have already reported their earnings as a part of the Q2 earnings season. Certain conclusions can be drawn from their results. Total earnings for the mentioned companies are +11.1% higher than during the same period last year, while revenues have added 5.9 percent when compared to Q2 2016. EPS estimates have been beaten in 73.7% of cases, revenue estimates — in 68.3%. Out of all companies reporting this season, 55.3% have managed to beat both earnings and revenue estimates.

Experts expect positive trend to remain over the next year
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