Stock Market Earnings Reports - So Far, So Good, But We Need More

Last week’s bank-dominated earnings reports provided assurance that the financial sector is doing fine. (See Table 1, below.) The major banks enjoyed increased revenues/earnings from higher interest rates. The issues raised were poor trading results (a volatile quarterly component) and a moderation in lending. That lending issue could confirm the slowing growth outlook – or it could be just a wiggle in an uptrend.Investors’ reactions to the reports appeared to be in line with the reported results, many of which beat expectations. As to whether those results carried over to the general stock market, it is hard to say. There was other positive news (like tariff/trade talks) that came out at the same time. Financial company reports are nice to have, but they do not directly address the slowing growth worry. Counteracting or confirming that concern requires insight from the true drivers of the economic trend: Industrials. Fortunately, we do not have to wait long. Next week, key industrial companies begin reporting their 2018 earnings reports and offering their 2019 outlooks. After the stock market closed on Friday, Bloomberg furnished a good description of today’s indecisive environment in “Confidence Busted. Consensus Broken. And a Rally Like Few Others.” (Underlining is mine.) Gains across risk assets belie a market riddled with doubt.Beneath the sea of green in risk assets right now is a rippling tide of doubt and anxiety.On the surface, the picture is approaching perfect. The S&P 500 Index, off to its best start since 1987, just posted a fourth weekly gain. It’s up 13 of 17 days since Christmas and the moves are being matched step-for-step by global stocks. Volatility keeps receding. Commodities and emerging-market equities have surged. Leveraged loans advanced again. High-yield bonds did, too.