Five Themes for Traders to Watch as Earnings Season Kicks Off

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Earnings Growth,Earnings Season,Delta Air Lines Inc.

(Bloomberg) -- A non-stop rally in US stocks since April is facing a major test as companies start reporting earnings next week.Most Read from BloombergMusk ...

-- A non-stop rally in US stocks since April is facing a major test as companies start reporting earnings next week.Griffin, Singer Met With Trump About Funding White House Bid

“The hurdle is high,” Ed Clissold, chief US strategist at Ned Davis Research wrote in a note to clients this week. “Even strong beats may not be enough for the Magnificent 7 growth rate to continue to accelerate.” “Growth is broadening out and so should the market,” Bank of America’s equity and quant strategists Ohsung Kwon and Savita Subramanian said in a note this week.

At the same time, options are implying an average move of 4.3% in either direction on earnings for S&P 500 members, which is above the historical average of 4.1% since 2012, said Vishal Vivek, equity trading strategist at Citigroup. US companies and investors watch for signs of any weakness in China’s economy that can ripple through the global economy, namely consumer discretionary, technology, industrials and autos.Artificial intelligence will continue to be in the spotlight. As the mega-caps’ pace of earnings expansion is set to decelerate, close focus will be on how companies such as utilities and data centers are deploying capital into AI and whether those investments will boost stock valuations.

 

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