What’s the Early Read on Q2 Earnings Season?

On the latest edition of Market Week in Review, Chief Investment Strategist for North America, Paul Eitelman, and Research Analyst Laura Bardewyck reviewed early results from second-quarter earnings season. They also discussed the European Central Bank (ECB)’s first rate hike in 11 years, as well as the latest developments surrounding the energy crisis in Europe.

Is Q2 earnings season shaping up better than expected?

Eitelman said that with the U.S. economy slowing down as the Federal Reserve (Fed) attempts to bring inflation under control, the health of the nation’s corporate sector has become an important watchpoint for markets. This makes second-quarter earnings season rather important, he noted, for clues into whether the Fed’s series of aggressive rate hikes will bend or break the U.S. economy.

So, what do the latest results suggest? While it’s still very early in the reporting season, Eitelman said that the initial results generally look OK. He noted that a few of the bigger S&P 500 companies, like Tesla and Netflix, reported results the week of July 18 that topped analysts’ expectations. “Tesla had some production issues last quarter due to COVID-19 lockdowns in Shanghai, but still delivered better earnings than Wall Street was looking for. Meanwhile, Netflix, which has struggled this year, actually lost less subscribers than feared,” he said.