Despite the S&P 500 extending losses into a fifth day last Monday, stocks reversed to end the week higher as Wall Street shifted its focus away from the Greek credit crisis toward U.S. corporate earnings. Global stocks tumbled last Monday as investors reacted to the sharpest decline in Chinese stocks in eight years. The Shanghai Composite plunged 8.5%, finishing the week down 10%. With the 2Q earnings season more than halfway complete, results have, so far, exceeded analysts’ original profit outlooks. Through Friday, 76% of large-cap, 73% of mid-cap and 64% of small-cap companies have beaten Earnings-Per-Share expectations, while 52% of large-cap, 51% of mid-cap and 53% of small-caps have beaten sales expectations.
For the week, the Dow Industrials rose +0.69%, the S&P 500 rallied +1.19% and EAFE (Developed International) returned +1.02%.
Here are the 3 stories this week that rose above the noise:
Adverse Effects of the Strong Dollar -- Bloomberg Business
"U.S. corporate profits fell about 1.4 percent in the fourth quarter last year before plummeting 5.2 percent in the first quarter this year, partly driven by a plunge in the amount American companies' foreign affiliates earned. Of the decline in overseas subsidiary profits caused by the appreciating currency and cheaper oil imports, about a third probably came specifically from the greenback, Carol Bertaut and Nitish Sinha wrote in a post this month."
Winners & Losers in Obama Trade Deal -- CNBC
"'The biggest winner will be Vietnam as foreign investors start to flood the country. Number two might be Malaysia and number three is Japan,'" Deborah Elms, executive director at Asia Trade Centre, told CNBC on Tuesday.
"'Bangladesh, Cambodia, Pakistan, and Sri Lanka are also expected to suffer negative impact effects from trade and investment diversion in the textiles and clothing industry towards TPP members, notably Vietnam,'" Biswas added.
"'The trade diversion effect of the TPP fall mainly on China," PIEE said".
Potential Takeaways on July Payrolls Strong Job Adds Means Quicker Rate Liftoff -- Reuters
"Unless next week's payrolls report is an outlier, investors should expect a continuation of the directionless market that has kept the S&P 500 trading in place for most of the year.
Should July post strong job gains, it would point to an economy strong enough for the Federal Reserve to raise interest rates for the first time in almost a decade.
But concern about the strength of the economies in China and Europe, along with a slide in energy prices, have made stocks stall. U.S. oil futures fell more than 20 percent in July, the largest monthly drop in almost seven years."
Articles chosen and summarized by the Tower Square Investment Management team. Tower Square Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Tower Square Investment Management individuals who provide investment management services are not associated persons with any broker-dealer.
International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.
