Earnings Season Off To Strong Start, Busy Week Of Earnings Ahead

Stocks ended lower on Friday and for the week. But the major indexes have closed higher in 5 out of the last 7 weeks. And look poised for more gains to come.

Earnings season wrapped up a better than expected first week. We've got another 5 weeks to go before the official end of earnings season. But if the rest of it is as good as what we've seen so far, stocks should be sitting at new record highs by the time earnings season is finished.

Reports that Iran seized yet another British oil tanker on Friday, weighed on stocks a bit. Both equities and the oil market have been little affected by the increasing tensions. But the latest report suggests that we could be entering into a new phase of heightened tensions. Hopefully cooler heads will prevail and a diplomatic solution can be reached.

Traders will also be watching the Fed in a week and a half. On July 30th and 31st, the Fed will have their July FOMC meeting. Expectations are high that the Fed will cut rates by a quarter point.

While some have been calling for a half point cut at this meeting, it's unlikely we'll see that. But the chorus of those calling for additional cuts by year's end is growing. And odds have increased substantially that we'll be a half point lower by the end of the year (if not more, and sooner).

Hanging over the market is the slow pace of the resuming U.S.-China trade talks.

It's still widely believed a deal is coming. And both countries are sufficiently motivated to make one – especially China, who has seen their GDP fall to the lowest level in 27 years, and is expected to see a growing list of U.S. companies move some or all of their operations out of China due to the trade uncertainty.

The U.S. economy is doing well. And the record unemployment rate, and surging corporate profits are a testament to that.

But a trade deal would really ignite this market.

The steady trek higher is great. The total return for the S&P is already up 20.6% year-to-date. And there's still 5½ months left to go.

Even without a trade deal, I'm expecting the S&P will do 30%+ by year's end.

But if and when a deal finally comes, stocks could soar even more. Bigger and faster.

In the meantime, make sure you're talking full advantage of this historic economy and market.

It's likely only going to get better.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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