According to Kirk, while only 10% of companies have reported to date, in terms of headline data, the signals have been mixed at best and the major US banks have, in general underperformed.
“In Europe, the banks have just commenced releasing their numbers, with Swedbank being one of the first out of the starting gate, but unfortunately missing analysts’ net income estimates; an early indicator, perhaps, that European banks are facing similar challenges to their US peers,” Kirk said.
Within the corporate sector, there is a greater level of disparity in terms of performance, but IBM’s earnings miss on Tuesday was worthy of note, Kirk said, in particular the level of adjustment coming from the continued strength of the dollar.
While Kirk doesn’t expect the FOMC to raise rates at next week’s meeting, he points out that a number of members have expressed a preference, albeit a data-dependent one, to raise rates this year.
“Considering the number of companies struggling to meet consensus forecasts, especially as analysts have already cut their earnings estimates, we do wonder what impact this will have on swing votes,” he said, adding: “The FOMC must surely be looking at the large blue chip earnings data currently being released, which at the moment suggests more of the wait-and-see strategy, particularly when the mixed earnings emanate from ‘Main Street rather than Wall Street’.
Reiterating that it might be too early to tell, Kirk said, a continuation of such mixed reporting will certainly not bring any clarity to the debate.
