Tesla, Big 6 Banks, Netflix, and IBM Set to Report Q2 Earnings Amid Low Expectations and Market Rally
July 18, 2023
Many significant corporations will be releasing their second-quarter earnings this week, amidst relatively low expectations. Investors are optimistic that the companies will exceed these modest expectations, potentially supporting the ongoing stock market surge. Tesla (TSLA), the most prominent name for this week, has already reported its record Q2 deliveries. In addition, all the remaining “Big 6” banks will also disclose their earnings alongside Netflix (NFLX) and IBM (IBM).
Earnings Expectations
Wall Street analysts predict that S&P 500 (SP500) companies’ earnings will decrease for the third consecutive quarter, marking the most significant decline since Q2 2020. It is forecasted that consumer-discretionary companies will record the highest earnings growth, while the energy sector is likely to witness the greatest drop. Dennis DeBusschere of 22V comments, “Ahead of Q2 reports, estimates have been revised downwards more than usual,” highlighting the increasing possibility of 2024 estimates experiencing negative revisions.
Performance of U.S. Stocks this Year
Despite persistent high inflation, weak consumer demand, and the Federal Reserve’s prolonged tightening cycle, U.S. stocks have flourished this year. All major indices have recorded Year-to-Date (YTD) gains, with the S&P 500 (SP500) up by around 18%, Nasdaq Composite (COMP.IND) up by roughly 36%, and Dow Jones (DJI) higher by 4%. The surge in the tech-centric Nasdaq Composite index has been powered by the recent advancements in Artificial Intelligence, and investors are eagerly waiting for more updates on this novel technology.
Market Commentary
Michael Kramer from Mott Capital Management stressed that for earnings to boost the ongoing rally, they would need to significantly outperform expectations and provide encouraging guidance. He warned that if these conditions were not met, the current rally might be viewed as deceptive. Fear & Greed Trader, the leader of Investing Group, also voiced his belief that the earnings season would progress satisfactorily but anticipated a potential market slowdown. However, Jean Boivin expressed his concern over earnings experiencing greater pressure in the future.