Market Overview

The U.S. corporate earnings for the second quarter of 2020 were expected to drop 33.8% compared to the similar period a year ago, according to preliminary figures by Refinitiv, a global provider of financial market data jointly owned by Blackstone Group and Thomson Reuters. But the same Refinitiv calculated that 82.1% of companies have reported above analyst expectations, at least among 312 companies in the S&P 500 broad market list that reported their financial results before July 31. This is much higher if compared to a long-term average of 65% and prior four quarter average of 71%. 

As 132 raining companies listed in the S&P 500 index will be reporting their Q2 2020 results during this week. The overall statistics have yet to be calculated. But it's already clear that a big percentage of rather positive reports is the main driver of the continuing and objective upward movement of the S&P500 index futures. It has touched the mark of 3335 points this morning, the highest value since February 21, and almost every week it edges closer to the annual and historical peaks located in the area of 3400 points. 

The most surprising quarterly profit yesterday came from Disney as revenue declines to $11.78 billion from $18.01 billion in Q1 2020 were a very gentle alternative to a quite possible bigger drop. After the quarantine Disney parks and media networks were not as baldy hit as the investment community feared, and the famous entertainment factory was even able to make a small profit of $0.08 in equity per share (EPS). That was much beyond the average expectations of more than $0.6 loss in EPS, according to the expert polls of major rating agencies. 

As a response, Disney Co.’s shares jumped above $130 per share just from the $117.5 area at the market close a day before, and it finished the New York trading session on Wednesday at $127.61, which is more than 8.5% higher. So, shares of Disney Co performed their largest daily percentage gain since March. “Despite the ongoing challenges of the pandemic, we’ve continued to build on the incredible success of Disney+ as we grow our global direct-to-consumer businesses,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “The global reach of our full portfolio of direct-to-consumer (DTC) services now exceeds an astounding 100 million paid subscriptions - a significant milestone and a reaffirmation of our DTC strategy, which we view as key to the future growth of our company,” he said. 

Some analysts, including Tyler Durden who is strongly addicted to ZeroHedge.com bearish view traditions, are worrying that some future subscribers’ numbers may disappoint the markets as many people just subscribed to the new Disney+ streaming service amid lockdowns when everyone was looking for entertainment. The majority assess the prospects of the recovery of the Disney's business as being full of promise, even if the company would maybe have to postpone some new movie releases. 

The next milestone on the near-term recovery path comes from the U.S. jobless claims that are awaited today and non-farm figures on Friday. The U.S. private sector added 167,000 jobs in July, according to a report by ADP. If that is the case, then the job market is slowing sharply from the prior month as some sparks in virus cases might halt the reopening of businesses in a number of states. Analysts polled by Reuters expected the private sector to have added more than 1.5 million jobs last month, and the difference may become meaningful for the markets. 

Another point is a fiscal rescue package story that is still unclear because of political wrangling in Washington. Top Democrats in Congress and White House officials appeared to harden their stances on the relief plan on Wednesday, but did point to a few hints of compromise, thus giving some kind of hope that a temporary unemployment benefit as high as $600 a week could be reinstated. Roy Blunt, a Senate Republican, remarked that "if there's not a deal by Friday, there won't be a deal," and it may be interpreted as a sign there would be an agreement at least before the weekend. 

The U.S. and China delegations have agreed to meet in the middle of August to review how both sides are fulfilling a "phase one" trade agreement they signed in January, The Wall Street Journal reported. This is, perhaps, another source of hope in time of some uncertainty. While waiting for any news on each of the issues listed above, major stock index futures of North America and Europe slipped slightly in the middle of the day, yet maintaining the overall positive sentiment of the week. So, corporate reports set the stage for a happy ending in Disney style that may come later but time and the path are among the main factors that will tell.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.