The Daily Breakdown previews what to expect from Q2 earnings as the big banks kick things off. We also dive into Uber’s technical setup.
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Friday’s TLDR
- Q2 earnings season is set to begin
- Uber stock inches toward $100
- BTC notches another record high
What’s Happening?
On the morning of July 15th, earnings season will officially be under way as JPMorgan, Citigroup, and Wells Fargo report earnings. But that’s just the tip of the iceberg.
Other giants like Johnson & Johnson, ASML, PepsiCo, United Airlines, Goldman Sachs, Bank of America, American Express and more will all report next week.
The Big Picture
When we step back, we’re at a much different place than we were at the start of the last earnings season. For starters, tariffs weren’t directly impacting profits yet. Second, the S&P 500 was still down almost 15% from its highs. Lastly, investors were very nervous as expectations for management outlooks were quite low.
Then everything changed.
The general consensus was that business was doing just fine, which helped give a confidence boost to investors as stocks surged ahead. Now as we go into the Q2 earnings season, stocks are at record highs.
What to Expect
According to Bloomberg, consensus expectations for Q2 are the lowest for the year, calling for growth of just over 2%. Generally speaking though, this estimate tends to be fairly conservative. If we look back over the last 13 quarters, the S&P 500 has met or beat expectations every time.
The bigger risk may be the back half of the year. Will management again tell a good story about the consumer and its customers, providing some stability (or even upward revisions) to Q3 and Q4 earnings?
If so, stocks could react favorably to that development. If not though and estimates are instead revised lower, stocks may decline as they reflect this new reality.
On a sector-by-sector basis, tech and communications are expected to have the strongest growth — and are the only two sectors expected to grow earnings by more than 10%. On the flip side, energy, consumer discretionary, and industrials have the lowest earnings growth expectations.
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The Setup — Uber
What a run it’s been for Uber, which has hit all-time highs in three of the last four trading sessions. Shares are now up more than 50% so far this year, as investors wonder whether the stock can get to the psychologically-relevant $100 level.
For bulls who are using Fibonacci measures, the latest correction (from $93.39 down to $81.74) puts a key extension in play at just above $100. That doesn’t mean it will get there, but Uber has certainly been trading with quite a bit of bullish momentum lately.
Options
The options with the largest open interest — meaning the largest open positions — are as follows: The August $100 calls, the July $100 calls, and the August $105 calls.
Remember, the risk for options buyers is tied to the premium paid for the option — and losing the premium is the full risk. Bulls can utilize calls or call spreads to speculate on further upside, while bears can use puts or put spreads to speculate on the gains fizzling out.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street Is Watching
Bitcoin knocked out another all-time high on Thursday, as the crypto space continues to move higher. After spending several months consolidating between $100K and $110K, BTC is finding some bullish momentum. Check out our recent technical update on Bitcoin and feel free to explore other cryptocurrency offerings on the discovery page.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.