July 14, 2017
Earnings reports for the second quarter are just beginning. It is broadly expected that earnings momentum in the second quarter will continue after a very strong first quarter of greater than 10% earnings growth. According to Zacks Investment Research, total 2Q earnings are expected to be up 5.6% versus a year ago on 4.6% revenue growth. Analysts expect earnings in energy and industrial sectors to be especially strong as they continue to recover. Technology companies should continue to post strong relative earnings as well. Given the competitive disruption caused by internet retailing and a weakening in automotive sales, earnings in the consumer discretionary sector will probably show some deterioration. Speaking broadly, domestic growth is sufficiently strong to allow for modest earnings expansion for the domestic equity market. We would not expect significant multiple expansion in a moderately rising rate environment, so solid earnings growth is extremely important to drive the equity market higher.
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