We are officially into corporate earnings season, with companies beginning to report their results from the second quarter. Heading into this earnings season, consensus, which is an average of analysts’ expectations, expected an earnings decline of over 40% for the broad U.S. market. This is in comparison to the same quarter one year ago. This earnings decline is a large amount, which is reflective of the economic shut-down that occurred during much of the second quarter.

With expectations set, markets will react to actual earnings vs. what was expected, as well as forward guidance. Forward guidance announcements provided by companies can impact stock prices and even offset a good (or bad) actual results figure. Higher uncertainty going forward has the potential to lead to greater price volatility.

Several financial companies reported results this week, and in general, those company stock prices advanced more than the broader market. Technology companies, which in general have been good performers this year, took a breather as prices softened during the week. Too soon to make any longer-term inference, however, another reason to remain diversified and invested in a manner that doesn’t require a single path or outcome going forward for success.

Market Comments

• U.S. stock markets finished higher on the week, led by advances in smaller companies

  • International stocks also performed well on the week and experienced a tailwind from a declining U.S. dollar

• Mortgage interest rates fell to a record low of 2.98%, the lowest rate in the 50 years since being tracked (source: Wall Street Journal)

• Related to the mortgage industry, housing starts increased 17% in June, recording the highest level since October 2016 (source: Federal Reserve Bank of St. Louis)

• Data on June retail sales in the U.S. came in ahead of expectations, increasing 7.5% compared to prior month (source: Wall Street Journal)

• Warren Buffet, CEO of Berkshire Hathaway and famed investor recently purchased the energy pipeline business from Dominion Energy

  • Berkshire will own 8,000 miles of natural gas pipelines, which makes up 17% of the nation’s total pipelines (source: Ned Davis Research)

Watch our Q2 2020 Market Update Webinar replay.

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