Stocks had a positive week, with the S&P 500 gaining 1.5% and the Nasdaq Composite adding 2%. Market volatility also fell, with the VIX closing at its lowest level of the year. However, as we head into summer, potential pockets of volatility remain, including one big name scheduled to report earnings.
Despite the strong rally seen in the past four weeks, the 12-month forward looking price to earnings ratio is now at 20.7, higher than the 5 and 10-year averages. With 93% of S&P 500 companies reporting earnings, FactSet indicates that earnings are on pace to increase by 5.7%, higher than the expected 3.4% at the end of March. However, with only 7% of companies left to report, there is a need for significant earnings growth to realign fundamentals.
One interesting note from this reporting period is the decrease in mentions of inflation during earnings calls, according to FactSet. Looking ahead, earnings expectations remain strong, with estimates for the second quarter at 9.2% earnings growth, third quarter at 8.2%, and fourth quarter at 17.4%. The full calendar year is expected to show growth of 11.4%.
This week, big names like Lowes and Macys are scheduled to report earnings before the open on Tuesday. However, investors are eagerly awaiting Nvidia’s earnings report on Wednesday after the close. Consensus forecasts expect significant sales and earnings growth for Nvidia, with an expected move of nearly $90 heading into the week.
In addition to earnings reports, economic data scheduled for this week includes existing home sales and the release of FOMC meeting minutes on Wednesday. Later in the week, data on Manufacturing and Services PMI, New Home Sales, and Durable Goods will also be released. Members of the Federal Reserve are scheduled to speak throughout the week.
Overall, Wednesday could be a potentially big day for investors, with the FOMC minutes and Nvidia earnings on the radar. With multiple geopolitical and economic factors at play, volatility may creep back into the market. As we head into the Memorial Day weekend, trading volume may lighten, but investors are advised to stick with their long-term objectives and investing plans.
