With a day to go before the long-awaited Midterm Elections commence, we hesitate to pave a way forward on the probabilities of electoral outcomes. Recall most of the “smart” money in 2016 did not consider the actual outcome of that General Election to be remotely possible. So let’s set this aside for now; there will be plenty of time to chart investment paths forward once results are tallied.
Last week, we saw more absolutely stellar results from the U.S. Labor Market, both with private-sector ADP (ADP - Free Report) employment last Wednesday of 227K new jobs and the federal government’s BLS survey, which saw 250K new jobs and an historically low Unemployment Rate of 3.7%. With wage growth also showing up in the data over the past few months, robust domestic employment has boosted Consumer Confidence and other things that keep the economic ball rolling.
We are late-cycle expanding, analysts agree. So jobs numbers notwithstanding, nearly a decade into a stock market bull run we are seeing volatility re-enter trading. As wage growth leads to inflation, the Fed keeps upping interest rates a quarter-point at a time in order to keep higher costs in check. A trade war with China and tariffs with our main trading partners add to an uncertain scenario going forward. These events have the potential to inflict economic pain — that much is known for sure.
But we also have possibly assisted Q3 GDP (first read a healthy 3.5%) by pulling forward trade that would have nourished future-quarter growth, both in Q4 and potentially through all of 2019, depending on whether all the threatened tariff increases are implemented or negotiated away. Thus — and markets selling off over the past month or so are clearly taking this seriously — we may at last be seeing peak levels in our economic data for the time being. Whether or not this helps usher in a post-bull market is something yet to be determined.
Q3 earnings season also continues this week; although we’ve seen many of the marquee names in the market already report, the overall numbers of companies bringing quarterly figures releases keeps up a rapid pace:
Loews Corp.(L - Free Report) underperformed expectations ahead of the opening bell today, reporting 88 cents per share instead of the 98 cents analysts had been expecting. Loews component Diamond Offshore Drilling (DO - Free Report) posted a better-than-expected loss per share to -26 cents while outperforming on the top line. Loews insurance company CNA Financial CAN surpassed expectations on both sales and earnings, by 1.2% and 3.5%, respectively.
Elsewhere,Pacific Gas & Electric (PCG - Free Report) topped estimates by a penny to $1.13 per share on a 3.7% beat on the top line to $4.38 billion. AndSunstone Hotel Investors (SHO - Free Report) posted FFO of 30 cents, a 2-cent beat, while revenues came in light of the Zacks consensus and year-ago results.