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An Earnings Deluge Coming At Us This Week

We had another several days chock full of earnings reports last week, more than 600 in all. We also saw much ado in Washington, with not only the “skinny” repeal of Obamacare failing the Senate vote, but also the shake up inside the White House with the arrival of Bull in the China Shop Anthony “the Mooch” Scaramucci as Director of Communications.Capping the week off, Chief of Staff Reince Priebus resigned as White House Chief of Staff late last week.

As far as the failure, yet again, of the GOP to push forward healthcare reform, it raises the question as to what’s next for the GOP–. Tax reform? Another run at healthcare? Infrastructure spending? At the same time, the reshuffling of the deck in the Trump Administration just a little over six months into a term raises concern over what is going on in the White House, especially after the highly publicized exchange between Scaramucci and Ryan Lizza at The New Yorker.All told, even though it gave late night talk show hosts much material to work with, it only adds yet another layer of uncertainty for investors as they assess.

That uncertainty also comes at a time when the initial reading for 2Q 2017 GDP missed expectations.

The number we got last week for GDP did represent a rebound compared to 1Q 2017; however, perspective is everything and historically the second quarter does tend to be one of the stronger quarters of the year due in part of inventory re-stocking.

Even so, the 2.6 percent for this year’s second quarter reading still missed the consensus expectation of 2.7 percent and the Atlanta Fed’s 2.8 percent forecast. Let’s remember too, all of those expectations have been inching down throughout the last several weeks as more data has been reported and so it’s more than just the raw number we have to look at, its the vector and velocity that’s important and as far as the economy goes, neither is headed in the right direction.

As we entered the current earnings season, we said one of the key things to watch would be corporate outlooks as they will set the tone for the back half of the year. Heading into the reporting season, expectations were clearly running high with EPS expectations for the S&P 500 to grow more than 11 percent compared to the first half of the year, well ahead of the 5.6 percent we’ve seen in the last several years.

Not to be repetitive, but rather to set the table, amid slowing domestic growth, consumers that are swimming in debt, a lack of real wage growth and an increasingly stalled White House agenda, our concern was executives would at a minimum temper their expectations for the coming months.

Peering through those 600 earnings reports, we found just that:

“ While I remain optimistic about our long-term future, the near-term environment has become more challenging than maybe we saw at the beginning of the year. So category growth has slowed broadly in lots of places over the last year or so, and we expect that growth will pick back up over time, but that pickup may not happen quickly.”

— Kimberly Clark (KMB) CEO Thomas Falk

“I think the outlook is actually stable…in the U.S. and the progress is directionally good, but the speed is not that what we...