Earnings so far have been a mixed bag. And while expectations have been lowered, there was weaker guidance for the next quarter and the rest of the year from many of those that have reported so far. Hence, market averages took a beating and the outlook for the remainder of the year appears to be range-bound at best. All sectors of the market were lower led by basic materials, energy, transportation and industrials. In all, the Dow Industrials fell nearly 3%. The S&P 500 Index and the NASDAQ were negative by over 2.2%. Small and mid-cap stocks were particularly hard hit, with the Russell 2000 off by 3.25% on the week. Declining stocks outpaced advances by about 4 to 1 and the NYSE saw 626 new 52-week lows compared to only 245 new highs. Gold tumbled 4% on better economic news and more certainty that a rate hike will take place in September. Oil fell 6%, with West Texas crude finishing the week at $48.14/bbl. While most of the buttonwoodproject candidates had decent earnings results for their most recent quarters, guidance was the key factor in many losing ground on the week and others were short of analysts’ expectations. Homebuilding is really hitting its stride as housing starts surged in June, jumping 9.8%, marking the eighth time in the past 10 months that starts had exceeded one million homes. Also, building permits, a more forward-looking metric, rose 7.4% from May to June, and soared 30% year-to-year, to their highest level in nearly eight years. Clearly, this is good news for the economy, as a range of industries are affected by housing. Job creation has showed signs of strength, but retail sales fell in June vs. a strong showing in May. Taking this all in, the Federal Reserve ends its two-day meeting on Wednesday and results will provide clues to its thinking on a rate hike. A slew of earnings will be announced this week to include Gilead Sciences, United Parcel Service and Colgate-Palmolive. All three have large international exposure, so I am not expecting any positive surprises. Also, Hess Corp. and French energy giant Total, SA will report on Wednesday. While oil service provider Schlumberger beat analysts’ views this past week, Hess is expected to show a loss of $0.72 per share compared to a profit of $1.38 in the second quarter of 2014 and Total will do well to earn $1.15 vs. $1.38 last year. The outlook for energy related stocks is still bleak, at best.
Here is the answer to last week’s trivia question: The Good Humor ice cream brand is owned by which company? Unilever; Campbell Soup Co.; Kellogg Co.; or General Mills? Answer: British-Dutch food and consumer goods giant Unilever owns the iconic 100 year-old American ice cream company. Good Humor was purchased in 1961 by another classic American name: Thomas J. Lipton, also a subsidiary of Unilever.
Today’s Trivia Question: A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates is known as: M-1 Money Supply Indicator; Yield Curve; Floating Exchange Rate Scale; or Confidence Index?