U.S. markets traded in a relatively tight range while finishing mixed ahead the start of the annual Jackson Hole, Wyoming conference beginning on Friday. A littany of Fedspeak emerged throughout the session from Jackson Hole, with much of the rhetoric focused on keeping quantitative tightening on schedule while pausing on interest rates.
Consumer Staples was the worst performing sector with other sectors showing slight gains or losses.
The are only 21 S&P 500 index members still awaiting to report Q2 earnings at this stage. Total earnings for the 479 index members that have reported are up 11.2% from the same period last year on 5.6% higher revenues, with nearly 75% topping EPS estimates and 68% beating revenue estimates
For the S&P 600 index, nearly 77% of the companies have reported Q2 results. Total earnings for these small-cap companies are down 14.1% from the same period last year despite revenues coming in 6% higher. The number of companies beating EPS expectations is just above 61% with 62% clearing revenue estimates.
For Q2 as a whole, combining the actual results with estimates for the still-to-come companies, total earnings for the S&P 500 index are expected to be up 10.9% from the same period last year on 5.4% higher revenues.
This would represent the second quarter in a row of double-digit earnings growth performance for the S&P 500 index.
Global Economy –European markets closed mostly higher following confidence in the French manufacturing sector which jumped to a near-decade high in August. The FTSE 100 advanced 0.3% while the Belgium20 and the Stoxx Europe 600 gained 0.2%. The DAX 30 added 0.1% while France’s CAC 40 index slipped 0.04%, or 2 points.
France’s confidence reading rose to 111 in August, topping the forecast for a reading of 108.
Asian markets were mixed with China’s Shanghai index falling 0.5% and Japan’s Nikkei giving back 0.4%. South Korea’s Kospi index and Hong Kong’s Hang Seng index advanced 0.4% while Australia’s S&P/ASX 200 added 0.1%.
Initial jobless claims rose to 234,000 in the third week of August, versus expectations for 237,000 first-time claims.
Existing home sales declined 1.3% to a 5.44 million home rate in July, which was worse than expectations for 5.565 million.
The Bloomberg Consumer Comfort Index Level for the week ending 8/20 was at 52.8.
August Kansas City Fed Manufacturing Index Level was up 6 points to 16.
Market Sentiment- Kansas City Federal Reserve President Esther George said the setup is there for the start of the balance sheet reduction though she didn’t give a firm timeframe after saying the markets seem prepared for it to begin soon, perhaps September.
She went on to add that the Fed should set the unwind on auto-pilot so that it’s not a meeting-by-meeting decision. She’s also not expecting any increase in fiscal spending.
The iShares 20+ Year Treasury Bond ETF (TLT) failed lower resistance at $127.50-$128 on the open after trading up to $127.31. The backtest to $126.72 held support at $126.50-$126.25.
Market Analysis- The PowerShares QQQ have been holding support at $142-$141.50 and the 50-day moving average for three-straight sessions. A move below $141-$140 ahead of the weekend would be a bearish development. Current resistance is at $143.25-$143.50.
The QQQ’s have been stuck in a mini trading range between $144-$140 for the past six sessions with a move above or below these levels possibly signaling the next short-term trend.
The Consumer Staples Select Sector Spider (XLP) sank 1.3% after failing to hold a downward trending 50-day moving average.
Fresh support is at $54.50-$54.25 following the session low of $54.44. Multi-month support is at $54 that has been holding since mid-March. A close below this level and the July low would be a very bearish development. Resistance is at $54.75-$55.
All the best,