Consumer Optimism Reigns, But Earnings Doubts
Today’s Spotlight Market
Stock futures are higher this morning, boosted by renewed optimism in the US economy.? According to a poll conducted by CNN/ORC, public confidence in the US economy is at its highest level in more than 7 ? years.? This comes on the heels of Friday?s Michigan consumer sentiment index, which was at its second highest level in more than 8 years.? Companies are hoping that this consumer optimism leads to consumer spending.? Global equity index futures have been somewhat tempered by lingering concerns over the Greek debt situation.? There also have been a number of high profile investors who have voiced concerns over corporate profits, which has led to some sluggishness in prices.
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Fundamentals
S&P futures continue to trade near all-time highs, boosted by optimism from both consumers and the corporate sector.? Globally, Central Bank easing continues to reign supreme.? The European Central Bank and Bank of Japan maintain aggressive quantitative easing (?QE?), which could help stimulate growth. Japanese Prime Minister Abe hinted at more QE.? Even countries that are not going the aggressive QE route maintain low interest rates, which could go lower.? The US economy and, by extension, corporate profits could benefit greatly from the rest of the world righting the ship. The remainder of the earnings seasons will likely have the greatest impact on the market over the medium-term.? Long-term, there is some concern that corporate profits may have peaked.? Productivity has climbed, as firms cut labor costs faster than output.? This led to improved profit margins and earnings.? Now that companies have begun to hire again, we could see the productivity bubble bursting.? This could actually lead to corporate profits plateauing, or possibly shrinking this year unless demand for goods outweighs this likely reversal in productivity.
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Technical Notes? -? View Today’s Chart
Turning to the chart, we see the June E-mini S&P trading near the 2100 level in early trading.? In order to capture some meaningful momentum, prices will have to break through recent highs at 2113.75 in convincing fashion.? Otherwise, prices could remain in a rut, or possibly break down and test sub-2000 levels.
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