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Dawn of a New Q2 Earnings Season

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Wednesday, July 11, 2018

We’re still pretty quiet here on the Western front, awaiting the deluge of Q2 earnings results that begins with the spigot opening for big banks — JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) among them Friday — before opening up to the publicly traded industries at large, starting next week. Though we do have a new economic read worth looking at.

June Producer Price Index (PPI) numbers have hit the tape this morning, posting gains of 0.3% on the headline — 10 basis points hotter than expected, though still down from the +0.5% reported in May. Interestingly, subtracting the often-volatile food and energy costs we still see a tally of 0.3%. Year over year, this ex-food & energy number is 2.8%, higher than the 2.6% expected and the 2.4% in the previous read.

This indicates that producer pricing is experiencing inflation — though still relatively slow, especially in light of historically low unemployment (which usually leads to spiking wage increases) and a Q2 GDP number some analysts expect to reach 4% or higher. If the PPI continues to ramp up at sub-3% levels considering everything else going on in the economy, we can still behave as if we’re Goldilocks — enjoying that which is not too hot, not too cold.

Also this morning, although not a marquee name nor a fixture on the S&P 500 (let alone the Dow 30), Fastenal (FAST - Free Report) — a $14 billion market-cap manufacturing company which develops and markets fasteners for all sorts of Construction and Manufacturing goods — outperformed expectations on both top and bottom lines ahead of the opening bell. Earnings of 74 cents per share on $1.27 billion topped estimates of 66 cents and $1.26 billion, respectively. For more on FAST's Q2 earnings, click here.

The Zacks Rank #3 (Hold) company rose initially 7.5% upon the release of its Q2 report, settling back to gains of roughly 6.6% a half hour ahead of the market open. Tomorrow, we anticipate quarterly earnings from airline major Delta (DAL - Free Report) , which is also a Zacks Rank #3 stock.

Market futures are in the red this morning, however, as an apparent resurgence of trade war fears appear to be resurfacing. Either that or President Trump’s harsh words for Germany ahead of the NATO summit today in Brussels may have awoken market bears in our otherwise idyllic trading scenario.

Mark Vickery
Senior Editor

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