Earnings Season Ahead: What to Expect from Key Sectors

Trump confirmed that tariffs will take effect August 1st, he says he signed Take it or leave it letters to 12 countries detailing new tariff rates on exports to the US with offers set to go out today.

Meanwhile, Treasury Secretary Besson calls trade one of the key pillars of Trump's agenda alongside tax cuts and deregulation aimed at boosting.

Jobs and innovation.

Joining us as we kick off the new trading week is Chris Versace, CIO of Tamatica Research.

Chris, good morning and happy Monday to you.

I hope you had a great holiday weekend.

So first and foremost, what does the extending tariff state mean? and do you think this will keep the US economy on track, especially given some of the recent economic data?

Well it's an interesting question, Remy.

As you noted in your comments, we closed last week with the S&P 500 at a record high, and in the next week or so we're going to kick off the June quarter earnings season.

So as we think about, you know, Trump sending these tariff letters, take it or leave it, and the potential for tariffs to go back into effect at April 2nd levels come August 1st.

I think there's a fresh bout of uncertainty being injected into the market, with the risk being that companies unsure of what the tariff landscape is really likely to be.

We could see them skew their guidance a little more conservative.

And again, when we think at the market at a record level, you know, we could see some profit taking in the near term, at least until we either start to see that earnings season unfold or maybe we get a positive surprise on the trade front.

Yeah, and as we kick off the new trading week, you were hearing a lot of noise behind me and we're hearing the term buckle up here, and that might be something that we'll have to do as we head into the rest of the summer, but we did get that strong US jobs data for the month of June, which could ease pressure on the Fed.

In terms of rate cuts, but while employers hired more workers than expected and unemployment fell, we saw growth in private payrolls slowing, Chris, so this does signal the Fed is likely to keep rates steady.

So what are the risks here as we look forward to the rest of this year?

Well, I think folks who are looking for a July rate cut after seeing not only the June employment report that yes, there was weaker than expected private sector job growth, but it was far better than what we saw in the June 8DP employment report.

It means that we're going to have to continue to track job creation in the coming months, but also keep our eyes steadfast on inflation.

I think what we saw in the June ISM PMIs, both manufacturing and services, tells us that, you know, the flow through of tariffs are having an impact likely to keep elevation, sorry, inflation elevated.

To me, Remy, it says the big question now is will we get a rate cut in September or is it likely to get pushed off even later in the year.

And Chris, if we had been on vacation and we're just hearing the headline news in terms of the S&P 500 and Nasdaq at all-time highs, but not really diving into what's going on under the hood, we have to keep in mind what's happening in terms of sector performance and the fact that small and midcap stocks outperformed last week.

And we're also seeing the Russell 2000 turning positive for the year.

So when it comes to key market segments to watch right now, you mentioned some of what's happening amongst these sectors, but we're watching healthcare, renewable energy, consumer financials.

So what do you think is key as we head into earnings season?

Well, I think as we gear into it, I mean, we want to see where, where is spending continuing to happen, where are we likely to see the positive impact in the second half of the year of stimulus spending.

So, you know, defense, homeland security, potentially energy, although we have to balance that with expectations that OPEC plus might deliver a bigger production hike than was previously expected.

But again here too, we take a look at on the AI front and we see comments from Foxconn.

A known partner to Nvidia as well as Apple sharing that their 2nd quarter revenue hit record levels and they continue to see a strong outlook for the current quarter.

It tells us that stocks like Nvidia, Marvel or others around the AI food chain that have worked should continue to do so.

And speaking of food chain, I understand that you're keeping an eye on ConAgra and also when it comes to airlines, we didn't hear in terms of guidelines from some of the airlines.

So what do you expect to hear when it comes to Delta Air?

Well, with Delta, you know, we really want to understand where are we seeing people continue to travel.

You know, we've we've seen reports of, uh, you know, fading domestic travel, but international travel remains strong, so we'll get a nice update on that.

But we also want to see what do they expect for the back half of the year given the busy holiday travel season, and I think.

We kind of gear into that.

We'll have a better understanding of consumer spending patterns, especially when we match this up against recent findings that consumers are slowing restaurant spending, and that's really why we want to keep tabs on what ConAgra has to say.

Are they seeing a spike in volume because folks are starting to cut back eating more at home?

OK, Chris, well, we will have to leave it there, but as always, thank you so much for joining me as we kick off a new trading week and we look forward to seeing you next week.

Thanks, Remy.