Two big themes:
1) commodities. The higher commodity priceshave been a double-edged sword for U.S. companies. The big earnings gains in Q2 will be coming from the companies that have profited from the commodity boom: Energy and Materials. The companies that have been most impacted by higher commodity prices (retailers, consumer staples) are seeing much more modest profit growth, even in the face of higher prices.
The Producer Price Index (PPI) and the Consumer Price Index (CPI) will be out next Thursday and Friday and will go a long way answering how much inflation is continuing to ripple through the economy.
2) international. The U.S. economy is underperforming the global economy: the more globally diversified, the better you will do. One of the few companies that have commented on the global economy so far has been FedEx, which recently reported earnings...CEO Fred Smith was bullish on the emerging markets.
The weak U.S. dollar will also help exporters.
Are valuations too high or too low? Much is made of the fact that the S&P 500 is currently trading at about 13 times forward earnings, historically an attractive entry point. That's true, but analysts are anticipating a ramp-up in earnings beginning in Q3 and accelerating into Q4.
In other words, the analyst community very much believes that the "soft patch" is temporary and that there will be earnings and jobs growth in the second half. Today's jobs report very much muddies such forecasts.
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