Welcome, Sandbox friends.
Today’s Daily discusses:
robust earnings support stocks
Let’s dig in.
Blake
Markets in review
EQUITIES: Russell 2000 +2.99% | Nasdaq 100 +1.33% | S&P 500 +1.13% | Dow +1.10%
FIXED INCOME: Barclays Agg Bond 0.00% | High Yield +0.22% | 2yr UST 3.733% | 10yr UST 4.289%
COMMODITIES: Brent Crude -0.75% to $66.13/barrel. Gold -0.15% to $3,399.6/oz.
BITCOIN: +0.89% to $120,108
US DOLLAR INDEX: -0.46% to 98.062
CBOE TOTAL PUT/CALL RATIO: 0.83
VIX: -9.35% to 14.73
Quote of the day
“The dictionary is the only place where success comes before work.”
- Vince Lombardi
Robust earnings support stocks
While the macro backdrop is giving mixed messages, other signals are decidedly bullish.
The technical evidence has been strong, as the U.S. stock market is acting like it normally does coming off a major low.
First, the breadth thrusts that triggered shortly after the April lows indicated a new uptrend was underway. Second, leadership was consistent with previous recoveries after large corrections, with tech and other offensive groups like financials leading. Third, long-term breadth readings began to reach levels that confirmed uptrends which were proven sustainable in previous cycles.
Of course, it is not perfect. Many stock groups are working through overbought readings while sentiment has improved as we find ourselves in a seasonally weak time of the year.
Not always the case, fundamentals would agree with the technicals.
At its core, the stock market is a long-term weighing machine and what it weighs most is earnings.
While prices can swing on sentiment or idiosyncratic developments, stocks over time tend to follow the direction of earnings growth because a company’s ability to generate profit ultimately drives its value.
As we enter the final stages of the Q2 reporting season, with ~90% of companies having reported, EPS growth is tracking at +11-12% YoY whereas the expectation at the start of the quarter was +4%. This follows a similar pattern from Q1.
84% of companies have beat estimates, surprising positively by 9%.
These sterling results come at a time when many investors feared an outright contraction in earnings growth due to the tremendous storm clouds around trade policy, passage of the One Big Beautiful Bill Act, and the potential emergence of another inflation wave.
As Tony Pasquariello of Goldman wrote to clients over the weekend: “US corporates -- amidst an operating environment full of uncertainty -- are doing what US corporates do best.”
Source: Goldman Sachs Global Investment Research
That’s all for today.
Blake
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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