Oct 10, 2019

A perfect economy, but far from a perfect earnings season

Powell attends an event at the Federal Reserve on October 4, 2019. Photo: Win McNamee/Getty Images

We're in a Goldilocks economy, if you believe Fed chair Jay Powell. He gave a speech on Tuesday to the National Association for Business Economics in which he reminded the attendees just how special the current economic situation is.

"We don’t get to see the 11th year of an expansion a lot, and there’s a lot to like about it, particularly for people at the lower end of the wage scale who are getting now the highest raises. And it’d be great to continue."
— Jay Powell
Data: U.S. Chamber of Commerce; Chart: Axios Visuals

What he's saying: Powell was upbeat about his interest rate cuts, which he said were designed to give the economy room to "gather steam again." He was also optimistic on inflation, and said he was trying very hard to persuade the markets that he wants to see it higher.

  • Powell barely needed to mention unemployment, which is at a 50-year low. There are now just 1.04 Americans looking for work for every job vacancy in America, according to new data from the U.S. Chamber of Commerce. That's an all-time low and bespeaks a very healthy labor market.

Yes, but: Next week is the official start of earnings season. Major banks will report their 3rd quarter results, including JPMorgan, Wells Fargo and Goldman Sachs. Look out for United Airlines and J&J too.

Data: FactSet; Chart: Axios Visuals

Why it matters: Expectations are low. Analysts expect S&P companies' third-quarter earnings to come in 4% lower than the same period last year. That would mark the biggest year-over-year drop since 2016, according to FactSet.

  • Companies have been guiding investors' expectations downward in the wake of uncertainty about the trade war, higher tariff-related costs and concerns about the global economy. What's certain is that earnings won't come close to the expectations that the market priced in last year.

Go deeper: The world according to Jerome Powell

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Federal Reserve's "pause lite" is the latest stock market lift

Federal Reserve Board chairman Jerome Powell announces a rate cut at a news conference on Oct. 30, in Washington. Photo: Eric Baradat/AFP via Getty Images

Fed chair Jerome Powell almost rocked the boat during the FOMC's October press conference on Wednesday after announcing a third straight cut to U.S. interest rates.

What happened: Powell initially said it would take a “material reassessment” in the outlook for the Fed to change its view that no further rate cuts were needed. But minutes later he reversed course, saying that holding rates at their current levels would be appropriate as long as the outlook stayed within the Fed’s expectations.

Go deeperArrowOct 30, 2019

The Federal Reserve's amazing pause

Illustration: Eniola Odetunde/Axios

Fed Chair Jerome Powell almost rocked the boat during the FOMC's October press conference on Wednesday after announcing a third straight cut to U.S. interest rates.

What happened: Powell initially said it would take a "material reassessment" in the outlook for the Fed to change its view that no further rate cuts were needed — but minutes later he reversed course, saying that holding rates at their current levels would be appropriate as long as the outlook stayed within the Fed’s expectations.

Go deeperArrowOct 31, 2019

The broader stock market hasn't moved much for most of the year

Illustration: Lazaro Gamio/Axios

Big moves in well-known companies like Tesla, Twitter, JPMorgan Chase and Ford have generated headlines this week but the broader market has been little moved. That's been true for the month, the quarter and the majority of the year.

By the numbers: As of market close Thursday, the S&P has risen 0.8% from its closing level a week ago; is up 1.1% so far in October; and up 2.3% since the end of Q2.

Go deeperArrowOct 25, 2019