US equities continue to get a boost from the first-quarter earnings season. Last week saw five constituents of the ‘Magnificent Seven’ provide updates, and, except for Meta Platforms, these were well received. More generally, 63% of S&P 500 constituents have now announced results. Of these, according to FactSet, 84% have beaten consensus expectations for earnings, while 81% have exceeded revenue forecasts.
Source: TN Trader
Even more impressive is that the year-on-year earnings growth rate is now 27.1%. If this holds up, it will be the strongest earnings growth rate since the fourth quarter of 2021, when corporations were bouncing back after the COVID disaster.
Aside from the US/Iran war and the struggle for control over the Strait of Hormuz, perhaps the biggest uncertainty concerns the Federal Reserve as Kevin Warsh prepares to replace Jerome Powell as Chair.
In an unusual move, Mr Powell has said he will stay on at the Board of Governors. This means that Stephen Miran, President Trump’s ultra-dovish pick, will have to step down. There’s also plenty of speculation about what Mr Warsh will do once in place.
Interestingly, the probability of a 25-basis point rate hike before the year-end has jumped to 24%, from 0% a week ago, according to the CME’s FedWatch Tool. The likelihood of no-change dropped to 66% from 80% over the same period. The President wants the new Chair to push for rate cuts. But with the FOMC more divided than at any time since 1992, he may be disappointed.
