We may not make it to England vs. Croatia fever pitch, but excitement around second-quarter earnings continues to rev higher. Again, we can thank investors weary of the trade game and what it means for stocks for increased interest in Wall Street results.
“In the absence of a recession, which still appears to be more than a year away (if not 2-3 years), the most important thing for investors to focus on is corporate earnings, which are set to increase by approximately 20% over last year,” Chris Zaccarelli, chief investment officer, Independent Advisor Alliance, says in a note.
That number matters, because S&P 500 companies returned 24.8% in the first quarter, and that 20% ballpark for the second, could help breathe some fresh life into stocks. So pumped are Bank of America, they’ve lifted their S&P forecast for this year and the next. What’s next? Dow 25,000, coming home again?
On to our call of the day, which says keep “buying America,” even if the S&P SPX, +0.88% has put you to sleep this year.
A Deutsche Bank team led by Chief Strategist Binky Chadha puts a spotlight on their sector-neutral basket of U.S. companies in a fresh note to clients. Those companies with a big chunk of sales on the domestic side have steadily beat those that have more foreign sales since March, say the DB team.
“We see this trend continuing on the back of a rising dollar, U.S. growth outperformance and persistent concerns around trade,” say the German bank’s strategists.
Breaking this down further, Chadha explains that the relative performance of companies exposed to domestic sales against those with foreign sales exposed has been tightly linked to the dollar. The strategist notes that the former started to outperform once the greenback DXY, +0.31% began perking up.
The Fed’s rate-hike plans, combined with other central banks, such as the ECB, committed to keeping rates on hold for a while, should keep favoring the dollar, according to the Deutsche Bank team.
Also boosting that domestic basket of stocks is U.S. economic growth, which keeps outpacing the rest of the world, say the strategists, who see more upside to come from all the White House’s stimulus efforts.
A final chink in the armor for U.S. stocks with more domestic sales is the trade-war headlines themselves, which they say aren’t gone for good and inherently hit companies with foreign sales harder, they suggest.
“With clarity being very limited, they are in a wait and watch mode,” the Deutsche Bank team says.
Check out: 5 ‘mega trends’ driving stocks higher regardless of Trump, tariffs, economy
“This rally in #stocks is the last hurrah! Investors should sell now, speculators may do better in August,” Guggenheim Partners CEO Scott Minerd told Twitter followers yesterday, as he warned of the trade-war dangers lurking for stocks.
Our chart of the day — charts, actually — might beg to differ a little. They are provided by Slope of Hope’s Tim Knight, who says, “the dashed hope of a rocking bear market which ran so fervently early this year has been smothered to death in its crib.”
He trots out several bullish charts, including one he says shows the “pathetic joke” that volatility has become, via the CBOE Volatility Index, and a Dow chart that shows the end is nigh for what he calls an “utterly lame attempt to establish a downtrend in 2018.”
And here’s his Nasdaq chart, which shows the index ready to “explode,” according to Knight.
“I mean, if Amazon isn’t a total bargain right now, what is????” he asks in his blog post.
Dow YMU8, +0.29% , S&P ESU8, +0.22% and Nasdaq NQU8, +0.26% futures are all modestly higher. That’s after the best day for the Dow DJIA, +1.31% in months, with gains for the S&P SPX, +0.88% and Nasdaq COMP, +0.88% as well. It was a largely positive day in Asia, while European stocks SXXP, +0.54% are up for a sixth day.
Elsewhere, oil CLQ8, +0.54% is climbing, gold GCZ8, -0.85% is slipping, and the dollar DXY, +0.31% is rising.
Getting the earnings ball rolling, Pepsi PEP, -1.64% reports earnings and revenues that beat forecasts, sending shares higher.
Fox FOX, +1.34% is reportedly revving up a new bid for Sky SKY, +1.97% that would beat the latest offer from Comcast CMCSA, -0.06% .
Amazon AMZN, +1.66% has revealed its rewards for members for Prime Day next week.
Yahoo Japan 4689, +11.39% soared in Tokyo on news that Altaba AABA, +0.33% (formerly known as Yahoo) will sell one-third of its remaining stake in the group to Softbank 9984, +2.10% .
Trump is headed to Europe, where he’ll kick off a seven-day tour with what could be a tense meeting with NATO allies, if a fresh batch of tweets are anything to judge by:
Before that, Trump set up the most business-friendly Supreme Court in years when he nominated Brett Kavanaugh to the court. That will make for white guy no. 108 in the history of the bench.
The FAA is putting its foot down over the “incredible shrinking airline seat.”
On the economic beat, NFIB says small-business sentiment slipped but is still high, historically. Job openings data will be on tap later.
“Don’t you know there’s a bloody game on?” That was the “message” from U.K. tabloid The Sun to politicians duking it out in that country over Brexit.
Theresa May’s future as prime minister is hanging in the balance after her key Brexit minister quit and wild-haired foreign minister Boris Johnson stomped out.
However, England only has eyes for its World Cup chances right now, with the semi-final tomorrow.
The Thai cave rescue is back on, and doctors are worried the boys may have “spelunker’s lung” from bat guano.
Woman beats 91-year-old Mexican man with a brick, tells him to go home.
A 1-year-old Honduran boy faces a U.S. immigration court alone
Trump’s administration will miss a court deadline for reuniting migrant kids with families
White House senior advisor Stephen Miller gets annoyed, trashes $80 sushi meal.
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