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Equities Gain with Positive Earnings, with More Heavyweights Reporting this Week

Weekly Update – July 22, 2022

  • The S&P 500 index rose 2.5% last week, led by strong gains in the consumer discretionary, materials and industrial sectors as many companies reported Q2 results above analysts’ expectations despite inflation and supply chain concerns.
  • The market benchmark ended the week at 3,961.63, up from last Friday’s closing level of 3,863.16. The index is now up 4.7% for the month to date but down 17% for the year to date.
  • The weekly climb came as a number of companies reported Q2 earnings above consensus estimates, sending their shares higher despite impacts from macroeconomic factors such as inflation, supply chain issues and the ongoing COVID-19 pandemic.
  • By sector, consumer discretionary had the largest percentage increase last week, up 6.8%, followed by gains of 4.1% each in materials and industrials. Technology was also strong, up 3.6%, followed by energy, up 3.5%.
  • Three sectors fell on the week: Communication services declined 1.2%, utilities shed 0.5% and health care edged down 0.3%.
  • The consumer discretionary sector’s gainers included shares of Tesla (TSLA), which jumped 13% on the week as the electric vehicle manufacturer reported Q2 adjusted earnings per share above expectations. Its chief financial officer said a 50% growth in deliveries in 2022 “remains possible with strong execution” even though the task “has become more difficult” due to a loss of output this year amid COVID-19 shutdowns in China.
  • In the materials sector, shares of Nucor (NUE) climbed 8.6% as the steel company reported Q2 earnings per share and revenue up from the year-earlier period and above analysts’ mean estimates. Nucor said it expects Q3 profitability to be down from Q2 yet the company still anticipates “another strong quarter of profitability” for Q3 and believes 2022 “will be the most profitable year in Nucor’s history.”
  • In industrials, CSX (CSX) shares gained 7% as the rail transportation company reported Q2 earnings and revenue above year-earlier results and analysts’ mean estimates. Following the results, Loop Capital upgraded its investment rating on CSX to buy from hold, while analysts at firms including Barclays, Raymond James, Stephens and Credit Suisse all raised their price targets on the stock.
  • In communication services, shares of AT&T (T) fell 11% even as the telecommunications company reported Q2 adjusted earnings per share and revenue above analysts’ mean estimates and raised its full-year mobility revenue outlook. Chief Executive John Stankey said the company cut its full-year free cash flow guidance to the $14 billion range from $16 billion “to reflect heavy investment in growth and working capital impacts related to timing of collections.”
  • Next week’s list of earnings reporters features heavyweights Microsoft (MSFT), Google parent Alphabet (GOOGL), Visa (V), McDonalds (MCD), United Parcel Service (UPS), Facebook parent Meta Platforms (META), Boeing (BA), Apple (AAPL), Amazon.com (AMZN), Pfizer (PFE) and Exxon Mobil (XOM).
  • Economic reports will be heavy on housing data earlier in the week, but a Federal Open Market Committee meeting concluding Wednesday will be center stage, followed by June inflation and consumer spending data later in the week.
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