The Zigmont Report (Daily Market Recap for 4/27/18)

Mike Zigmont

Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $10B AUM, offering volatility management solutions to its investor base worldwide.  Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business since 2008, sending it daily shortly after the market close.

The opinions expressed below are my own

Very uninteresting.  Earnings poured in after last night’s close and before this morning’s open.  Positive surprises abound.  80% of reporting companies are beating estimates.  That’s high, even for the skewed analyst/management game!  US equity futures were up small before the open and the tape wondered around some over the session.  We finished about flat.  Capital flow was pretty light at 85%.

We’ll talk about a few things below but here’s the key about today:

  1. We didn’t move much
  2. Capital wasn’t very active

Let’s check back in on earnings season.

2018 Q1 Earnings season:

49% of the S&P 500 reporting (+36% vs 4/20 data)

Surprise vs Estimates

  • Sales: +0.7% (-1.1% vs 4/20 data)
  • Earnings: +6.8% (+0.7% vs 4/20 data)

Growth vs Prior (Y/Y)

  • Sales: +9.5% (-0.2% vs 4/20 data)
  • Earnings: +24.2% (+1.6% vs 4/20 data)

It looks like earnings season is progressing about the same as it started.  The changes are mixed and the changes are relatively small.  There’s been no price trend to the earnings season and that fits with the fact that there appears to be no trend to the reporting results of the season.  Here’s a picture of the S&P over the earnings season:

If the first half of earnings season didn’t surprise the market into a direction, I think it’s very unlikely the second half of the season will kick the tape into a trend.

I still think that If a trend is going to emerge, it’ll take a big macro catalyst.

What might those be?

  • the next FOMC decision is Wednesday (5/2)
    • No change is expected but the market will eye the statement for clues as to whether the Fed will stick or stray from the 3-hike-a-year plan
  • April nonfarm payrolls (+190k est vs +103k) come out on Friday (5/4)
    • Last month’s light number was considered distorted, the market will be looking for a return to ‘normal’

So that’s what’s ahead.  I don’t think these catalysts will change the treading-water nature of the market but those will matter more than the continuation of earnings season.

Have a good weekend, see you Monday,