Today's highlight

kenwind

The macro calendar is light today, but there will be plenty to digest over the week. The bulk of this week's focus here in the US on the economic front will be housing . The NAHB Housing market index will be released today, followed by Starts and Permits tomorrow, Mortgage apps on Wednesday and Existing home sales on Thursday. A slew of earnings will also be released. Despite the decent earnings numbers we saw at the end of last week, investors saw no reason to be long going into the weekend (more on earnings below). Unfortunately, the sell off we saw on Friday was coupled with the best volume day of the week (9.8 billion shares). Some positive news out of China overnight (potential additional govt. stimulus) kept the continuation of market bludgeoning to a minimum (Japan closed today as well). Europe is doing well and has been improving all morning. With the pullback we experienced last week and positive momentum coming in this morning, one would have to expect a bounce, especially if decent figures continue. If investors simply use the upcoming releases as reasons to sell or short, we'll likely be in for a long summer.

As we look ahead to the second week of earnings season (128 large cap companies scheduled to report), in the first week (49 companies reported), positive earnings surprises were at 76% and positive revenue surprises at 71%. At the sector level, while the low total number of companies reporting doesn’t lend itself to stable surprise rates that can be gauged, it is interesting that 73% of the companies in Consumer Discretionary reported a positive surprise while only 53% reported a revenue surprise. This is generally associated with higher than expected margins. They noticed that consensus has moved up slightly across most sectors during the past week, reducing the likelihood that earnings will continue to surprise in the latter part of the reporting season. For the S&P500, Q2 EPS was revised upward by 1.74%, with Financials leading the way at 7.5%. The only 2 sectors were revised lower were Materials (-0.29%) and Telcos (-0.13%).