Wednesday, February 18, 2015A combination of mixed U.S. data and favorable Greece news provide the backdrop for today’s trading session.
Greece is reportedly close to striking a deal with its creditors that will extend the existing bailout for another six months.
What this means is that the Greek government has accepted reality and taken what was on offer all along. This is likely the end of the Greek drama for now; after all, a final deal beyond the next 6 months still needs to be worked out. But the more immediate threat of a Greek default and bank run appears to have averted, for now at least.
On the home front, we have a busy economic calendar with January housing starts and industrial production followed by minutes of the Fed’s last meeting in the afternoon. The starts and permits data wasn’t bad even though it went down from the prior-month’s level that was helped by favorable weather. The industrial production numbers coming out a little later are expected to show improvement on the manufacturing side, offset by weakness in the energy sector.
The energy weakness is no surprise to anyone and is net-net a positive for the consumer spending, which will likely show up in today’s FOMC minutes of the last meeting. Nothing new is expected from the minutes today, though the consensus expectation is for a June start to the rate hike cycle.
On the earnings front, including this morning’s reports Duke Energy (DUK), NiSource (NI) and others, we now have Q4 results from 411 S&P 500 members. Total earnings for these companies are up +6.5% from the same period last year on +1.5% higher revenues, with 69.3% beating earnings estimates and 56.4% beating top-line estimates.
As with industrial production numbers referred to earlier, the Energy sector has been a big drag on earnings growth as well. Energy aside, the beat ratios and earnings growth rate in Q4 thus far is roughly in-line with what we have been seeing from the same group of companies in other recent quarters, but revenues are on the weak side. Importantly, estimates for the current and following quarters have been coming down sharply, with the Energy sector again playing a leading role.
Sheraz Mian
Director of Research
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