Earnings Season Takes Center Stage, But Netflix Set To Weigh On Stocks Today

Stocks closed mostly lower yesterday with only the Dow finishing in the plus column.

Lingering concerns over tariffs will remain in the back of people's minds. But the market has been quite resilient at not letting it get in the way of stock gains. And rightly so given the strengthening economy, record employment, and surging corporate profits.

The main focus right now will be on Q2's earnings season.

It officially kicks off this Wednesday when Alcoa reports after the market's close.

But we've already seen some companies report their Q2 results. Most of these have been quite good so far. But we're likely in for a tougher day today after Netflix reported weaker than expected subscriber growth after yesterday's close. That sent shares down by more than -14% in after-hours trade and is likely to set stocks back, if only temporarily.

Add in a snafu on Amazon's website yesterday during its super-shopping Prime Day, and there could be some weakness today, at least in tech. But again, I see these as transient events and not endemic of anything that's happening in the broader market.

In other news, yesterday's Retail Sales report showed m/m sales up 0.5%, in line with expectations. Analysts noted the "strong gains for the discretionary categories of autos and restaurants".

The Empire State Manufacturing Survey came in at 22.6, beating expectations for 22.0. The report was labeled "very strong" with "a little less stress in supply chain indications". All good news.

And Business Inventories rose to 0.4%, in line with expectations but up from last month's 0.3%. Sales however were up an outsized 1.4%. The report goes on to show inventories up 4.4% on a y/y basis while sales are up an even more impressive 8.6%.

Will be interesting to see how the markets digest some expected weakness in tech today. But keep your eye on the bigger picture.

This earnings season is shaping up to be one of the best in years, and the market is poised for a second-half surge.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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