S&P 500 steady ahead of earnings, FOMC

The equity markets are relatively calm as investors await big earnings, FOMC and key economic data, as we enter the second half of the week

We are in the busiest week of the earnings season and reports are coming in thick and fast. Ahead of tomorrow’s big events, when the likes of Apple, Amazon, Facebook and Alphabet are due to report their results, today’s reporters include Boeing, General Electric, Spotify and PayPal. We also have the FOMC later this evening. US index futures point to a higher open, tracking the gains seen in Europe.
  • Boeing will report its earnings before the open on Wednesday and will be an important company to watch. Analysts expect earnings of -$2.57 a share, up from the -$5.21 EPS last year when the manufacturer was dealing with the 737 Max crisis. Revenue is expected to have fallen 20% year-over-year to $12.61 billion. Boeing is still dealing with the 737 Max crisis as well as the declines in air travel demand. However, the company could recover as air travel picks up after the easing in restrictions and analysts are hopeful that at some point the 737 Max issues will finally be resolved. Share prices have recovered somewhat modestly from their March lows, underperforming the S&P 500. It will need a strong set of numbers if the stock is to catch up with the wider markets.
  • GE will also report ahead of the opening bell, with analysts expecting EPS of -$0.10 on revenue of $17.12 billion. The conglomerate’s aviation sector is expected to bear the brunt of the Covid-19 turmoil as demand for commercial jet engines were almost non-existent. Losses are also expected in the Healthcare, Industrial and Power. GE shares are up slightly from the mid-May low of around $5.50 but remain a whopping 38% lower on the year.  
  • Investors are eager to see the Q2 earnings for Spotify when it reports earnings before the start of play today. The music streaming company is expected to report a loss of $0.49 per share on $2.10 billion in revenue. During lockdown, demand for music streaming boomed. Shares in Spotify have soared over the past few months as it hit repeated all-time highs. It almost hit the $300 mark, before pulling back ahead of its earnings. A solid set of results will be music to the ears of investors. Pun obviously intended.
  • After the close, PayPal is expected to report revenue increase of 16% with $4.99B in total revenues while earnings are expected to be $0.88 a share. Total active accounts are seen rising to 335M vs. 325M in Q1. The payment company has seen its shares sore during lockdown and it already up a solid 63% year-to-date. The earnings and outlook better match or beat expectations for investor to justify holding the stock at these lofty levels.   
Ahead of these earnings, the FOMC later on, and more earnings on Thursday, the S&P 500 CFD was consolidating around prior resistance circa 3214 after breaking above this level several days ago. For as long as the index hold its own above this level now, the path of least resistance would remain to the upside. However, a clean breakdown below this level would be bearish because that would show the sellers have regained the key pivotal level again.

S&P 500
Source: TradingView.com and ThinkMarkets