EXAMINING EARNINGS & YIELDS

Stocks posted moderate gains last week, as the S&P 500 added 0.52%, the Dow increased 0.42%, and the NASDAQ rose 0.56%.^[1] International stocks in the MSCI EAFE followed suit, gaining 0.41%.^[2]

We received numerous new data updates last week, and most provided positive news for the economy. Retail sales, housing starts, and industrial production all beat expectations and increased in March.^[3]

Amid last week’s primarily positive data updates, two key occurrences also affected markets:

Corporate earnings
Treasury yields

A Closer Look

1. Earnings Season Continued
As of April 20, about 16% of S&P 500 companies shared their results for the 1st quarter, and over 80% of them beat earnings expectations.[4] However, this solid performance has yet to impress investors. While most companies have exceeded earnings projections, their stocks haven’t reflected the growth.

On the other hand, companies that have beaten their sales projections – but missed on earnings-per-share – have dropped an average of 4.4% on their release days.^[5]

Takeaway: So far, corporate earnings are on the rise, but any companies that don’t beat estimates are experiencing considerable stock declines.^[6]

2. Treasury Yields Rose
The yield on 10-year Treasuries hit 2.96% – the highest point since 2014. At the same time, the 2-year yield climbed to its highest since 2008.^[7] When interest rates rise, companies have higher borrowing costs, and bonds become a more enticing alternative to stocks.

Some investors are also concerned that the difference between the two Treasuries’ yields is too close. This occurrence, known as a flattening yield curve, can imply that investors are not confident in the long-term economic outlook.^[8]

Takeaway: Rising Treasury rates are worth paying attention to. If they are a symptom of a growing economy, the markets should be able to handle them. However, if questions about economic growth accompany the increases, investors may worry.

What Is Ahead

We are now in earnings season’s busiest week, when more than a third of S&P companies will release their reports.^[9] Additionally, on Friday, April 27, the initial estimate of the 1st quarter Gross Domestic Product will come out.^[10]

All this information will help deepen our understanding of where the economy stands – and what may lie ahead. If you have any questions about current data or future projections, we are available to talk.

ECONOMIC CALENDAR
Tuesday: New Home Sales, Consumer Confidence
Thursday: Durable Goods Orders, Jobless Claims
Friday: GDP, Employment Cost Index, Consumer Sentiment

_{Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.}

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, based on the methodology that was in effect on the launch date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back tested returns.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

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