U.S. stocks moved higher today as investors pushed the S&P 500 Stock Index above its latest closing high of 2,872.87 recorded on January 26, 2018. Shortly after reaching that record high, the stock market took a steep 10 percent plunge before clawing its way back over the past seven months. The S&P 500 closed today at 2,862.96, about 10 points shy of the previous record close.
Stock investors have had to face a slew of headwinds such as trade tariffs, rising interest rates, higher inflation and a slowing global economy. However, investors have had much to cheer about when it comes to company earnings this year! The strong earnings have a been a source of encouragement at a time of uncertainty over the trade disputes between the U.S. and some of its biggest trading partners.
According to Thomson Reuters I/B/E/S, second quarter earnings are expected to increase 24.6% from Q2 2017. Of the 467 companies in the S&P 500 that have reported earnings to date for Q2 2018, 79.2% have reported earnings above analysts’ expectations. This is above the long-term average of 64%. The estimated earnings growth rate for the S&P 500 for Q3 2018 is 22.4%.
FactSet Research Systems is predicting the S&P 500 calendar year “bottom-up” EPS to be $162.06 for 2018. That represents a 21.43% increase over 2017. Their EPS estimate for 2019 is $178.32 assumes a 10 percent increase over the current year.
If investors can ignore the negative headlines and focus instead on the strong earnings growth for U.S. companies, the stock market will continue to set more record highs in the months ahead!