Earnings Watch: Focus Turns to Big Consumer Brands

With the bar set so low, technology companies had an easier time beating earnings expectations this week. Apple's up next week, but the focus starts to shift away from tech toward the consumer.

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"Good enough"earnings helped the tech sector outperform despite light sales numbers from Microsoft and Google and a revenue warning out of Intel.

Apple , Facebook and Netflix are among the tech names reporting this coming week. (Related: Will Apple Disappoint?).

“You have had stocks rally because earnings have been coming in above lowered expectations,” Dorsey Farr, co-founder of French Wolf & Farr, told CNBC. But he doesn’t expect the markets’ move higher to be sustainable.

“We have been rallying for the wrong reasons recently,” he said. “People are really looking for policy stimulus and we don’t see that as a reason to buy stocks.” Farr’s view is that stocks are in for a tougher period in the days ahead and would tread cautiously. (Related: Rally Almost Perverse).

But the fact that revenues are light but profits are strong could be bullish for equities once the global and U.S. economies start to turn up.

Anthony Chan, chief economist at Chase Wealth Management, told CNBC, “I’m really impressed by the fact that even through revenues are coming in light, the profits are strong.”


“That tells you that as the economy worldwide and in the U.S. starts to picks up, even if it picks up just a little bit, we’re going to see those profits exploding and that’s something the markets need to prepare for,” he said.

Unlike in tech, better-than-expected earnings from the big banksdid little to deter selling in the financials sector this week. Investors remain worried about what the lower-for-longer interest rate environment means for banks’ revenue prospects.

Next week the focus shifts to the consumer. McDonald’s reports on Monday; PepsiCo, Ford Motor and Visa on Wednesday and Colgate-Palmolive, Amazon.com and Starbucks on Thursday.

Merck and Eli Lilly in pharma, 3M, Caterpillar and Boeing in industrials and ExxonMobil, ConocoPhillips and Chevron in energy are also reporting.

A complete earnings calendar can be found here.

Guidance will remain crucial. “I generally think Q2 earnings aren’t going to be the issue,” Christopher Konstantinos of Riverfront Investment Group said on CNBC’s “Closing Bell” on Tuesday. “It’s the guidance and the outlook management teams give on the guidance. So I could see earnings revisions going lower here.”

Konstantinos sees room for estimates to come down for the cyclical sectors as earnings season progresses.