Last week, equity investors were provided encouragement as well as a welcome degree of price stability due in large part to the Q2 earnings results and guidance. Caterpillar, Inc.’s (CAT) earnings on Monday were a good case in point. Q2 earnings came in at $2.97/share versus consensus expectations that had been calling for $2.66/share. That 11.65% beat on earnings helped lift the market out of potential trouble on Monday. Also on Monday, Athena Health (ATHN) reported quarterly results that handily beat consensus forecasts, $0.88/share versus $0.62/share – a 41.94% beat. Illumina, Inc.’s results were also significantly stronger than expected. Quarterly results were $1.43/share versus consensus forecasts that were calling for $1.11/share – a 28.83% beat. Without question, the most significant quarterly results came from Apple Inc. At $2.34/share, results were 7.83% above consensus of $2.17/share. The results fueled a 9% gain in share price and a valuation above 1 trillion dollars by week’s end.
We continue to see Q2 corporate results and guidance that, on balance, provide for constructive investor engagement. Additionally, as discussed at length in these Monday morning notes, economic data continues to frame our economic health in rather robust terms. For example, the personal incomes and outlays data for June, released by the Bureau of Economic Analysis, though backward-looking, was in-channel with recent readings. The M/M change in personal income was 0.4%, spending was 0.4%, and the PCE Price Index was tame at 0.1%. The ISM Mfg. Index for July was 58.1, fractionally lower than June’s 59.5 and May’s 60.2 but again, in-channel. Crude inventories, as framed by the EIA Petroleum Status Report for the week of July 27, saw a modest build in both crude and distillate inventories. Gasoline saw a draw of 2.5M barrels.
As expected, the FOMC meeting announcement on Wednesday afternoon left interest rate markets largely undisturbed. No change in rates was announced though the verbiage in the announcement did confirm what nearly all investors know, the economy is strong – in effect shadowing further tightening in coming quarters. The employment report for July was on its face underwhelming given that the initial reading was a gain of 157K versus Econoday consensus of 190K. However, the previous month’s report was revised substantially higher from 213K to 248K, and the unemployment rate dropped back down to 3.9% from the prior reading of 4%. Another strength of the July report came from the ongoing rebound of the manufacturing sector, which gained 37K.