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Corporate Earnings Hopes Rise on Early S&P 500 Results ‘Surprise’

New Census Data Gives Hope Decline of Kids Living with Both Parents Has Bottomed Out

WASHINGTON—U.S. Census Bureau data shows that, while slightly more than 60 percent of American children live with their biological or adoptive parents, the downward trendline has flattened out and may be heading in a positive direction, according to the Institute for Family Studies (IFS). “As recently as 1960, less than two in 10 children lived apart from two married parents, a reality which was approximately stable as far back as 1850,” according to IFS Research Fellow Lyman Stone, author of the new study that was published Jan. 15. “But while the present situation leaves many children bereft of the care, attention, and material benefits of a married household, it’s actually not as bad as it has been in the past,” Stone writes, noting that “since 2014, the share of children…

Corporate Earnings Hopes Rise on Early S&P 500 Results ‘Surprise’

As investors look to a fresh week of corporate earnings announcements, figures published last week revealed that 72 percent of S&P 500 companies beat analysts’ expectations in terms of profits.

In addition to a “positive surprise” in the form of higher-than-expected earnings per share (EPS) figures—which serve as a gauge of a company’s profitability—nearly two-thirds of firms listed on the S&P 500 came in above expectations in revenues, data released on Jan. 17 by FactSet (pdf) showed.

“For Q4 2019 (with 9% of the companies in the S&P 500 reporting actual results), 72% of S&P 500 companies have reported a positive EPS surprise and 63% of S&P 500 companies have reported a positive revenue surprise,” wrote John Butters, senior earnings analyst at FactSet, a financial data services company.

The S&P 500 has gotten off to a strong start in January, up 3 percent this year, fueled by a truce in the U.S.–China trade war, low interest rates, and signs that the economy remains healthy.

Corporate Earnings Hopes Rise on Early S&P 500 Results ‘Surprise’

Wall Street climbed to record highs on Dec. 17, with major indexes turning in their strongest weekly gains since August, after strong U.S. housing data fueled optimism.

President Donald Trump weighed in on the housing data, noting in a tweet: “Tremendous surge in new housing construction in December, 16.9%, biggest in many years!”

Housing starts jumped to a seasonally adjusted annual rate of 1.608 million units last month, the highest level since December 2006. The percentage gain was the largest since October 2016.

“The shockingly large rise in home construction is likely to provide an unexpected boost to growth,” said Joel Naroff, chief economist at Naroff Economic Advisors. “However, the first quarter of 2020, it might be a lot softer.”

All Eyes on Another Week of Corporate Earnings

Investors are sure to follow corporate earnings closely in the coming week, as the earnings figures so far are based on less than 10 percent of companies reporting. And a year-over-year comparison of fourth-quarter earnings shows a drop in profit.

“For Q4 2019, the blended earnings decline for the S&P 500 is minus 2.1 percent,” Butters wrote. “If minus 2.1 is the actual decline for the quarter, it will mark the first time the index has reported four straight quarters of year-over-year earnings declines since Q3 2015 through Q2 2016.”

Despite near-zero corporate earnings growth last year, stock markets have performed well, with many investors anticipating a turnaround in profits in 2020 as global growth stabilizes and trade tensions diffuse.

“The market rally indicates that investors expect higher earnings growth again in 2020,” Alexander Voigt, founder and CEO at daytradingz.com, told The Epoch Times in an email.

“The China trade deal and presidential elections are the main influential factors. I expect a stronger outlook during the current earnings release period and a subsequent higher earnings growth for 1Q20 and 2Q20.”

Others expect lackluster figures.

“Analysts should curb their earnings enthusiasm,” Max Gokhman, head of asset allocation at Pacific Life Fund Advisors, told The Epoch Times in an email. “A dearth of capex [capital expenditures] in 2019 means that earnings targets will be hard to hit this year.”

The unofficial kickoff of the current corporate earnings season began when JPMorgan Chase published its results on Jan. 14 (pdf), posting record profit growth of 21 percent, between the fourth quarter of 2019 and the same quarter a year earlier.

America’s big banks followed with earnings releases, with strong revenues overall, but profits coming in mixed.

Banks faced a dynamic operating environment in 2019 after the Federal Reserve cut interest rates three times. Higher rates tend to benefit the bottom lines of deposit-taking financial institutions because they widen spreads between the interest that banks earn from loans and the interest they pay for deposits. Lower rates can have an upside, too, however, as they tend to increase demand from consumers looking to take advantage of cheaper loans.

“Earning expectations for the banks have been elevated, but for the most part, they have delivered,” said Bob Lang, founder and chief options strategist at Explosive Options.

Lang added that he expects many banks to continue their 2019 posture of increasing dividends and stock buybacks.

“This should spill over into higher prices for stocks in 2020 as banks deliver more capital back to investors,” he told The Epoch Times.

IBM, Netflix, and United Airlines are all scheduled to report quarterly earnings on Jan. 21.

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Boeing Grapples With New Software Snag on 737 MAX

Boeing said it is fixing a new software snag found last weekend during a technical review of the proposed update to the grounded Boeing 737 MAX. “We are making necessary updates and working with the Federal Aviation Authority (FAA) on submission of this change, and keeping our customers and suppliers informed,” Boeing said in a statement. “Our highest priority is ensuring the 737 MAX is safe and meets all regulatory requirements before it returns to service.” Company officials said the issue relates to a software power-up monitoring function that verifies some system monitors are operating correctly. Boeing has halted production of the 737 MAX this month following the grounding in March of its best-selling plane after two fatal crashes in five months killed 346 people. The company has been in…