Week Finishes on Stronger Note
Despite rising US coronavirus infection numbers, the S&P 500 finished the week on a strong note as investor sentiment was buoyed by new trial data this morning from Gilead Sciences that indicated additional promising results for its coronavirus treatment, Remdesivir. As a result, the S&P 500 finished the week down only about -1.55% on the year and investors now find themselves heading into the unofficial start of the second quarter earnings season.
Upcoming Second Quarter Earnings
On Tuesday, Citigroup, Well Fargo, Delta Airlines, and JPMorgan all report Q2 results and it will be very interesting to hear these bellwethers’ economic commentary, as well as how investors respond to what is expected to be the largest year-over-year decline in earnings since Q4 2008 (-69.1%). Per FactSet, analysts are predicting a whopping -44.6% contraction in corporate profits, after Q1 fell almost -15%. Earnings estimates for Q2 have declined by 37% from March 31 to June 30 and this is the largest expectations decrease for a quarter since FactSet began tracking the data in Q1 2002. Therefore, while we generally believe putrid Q2 earnings are mostly priced in, we will be closely watching for guidance updates as an eye-popping 185 companies in the S&P 500 (i.e. IBM, Fedex, Coca-Cola) enter the Q2 earnings season having already withdrawn previous earnings projections due to the incredible levels of uncertainty coronavirus has introduced.
Ian Browning, CFA | Director, Investment Strategies & Shareholder
Peter E. Simmons, JD | President & CEO