Earnings season began at the start of this week with Pepsi (PEP) and the first of the major US banks and brokers reporting Q2 numbers.  It was a light week with only 32 companies reporting through Thursday, but in the coming weeks, we’ll see 100+ reports on multiple trading days.

From our Earnings Explorer tool, below is a recap of the results from this week’s earnings reports.  78% of companies that reported this week beat consensus analyst EPS estimates, while 72% topped consensus sales estimates.  Those are both strong numbers.  In terms of future projections, 16% of companies raised guidance, and not one company lowered guidance.  That’s rare even with the very low number of reports so far.

While guidance and beat rates were strong, investors still used earnings reports as an opportunity to sell.  The average one-day share price change this week for companies in reaction to their earnings reports was a decline of 0.57%.  All of those declines came on the initial gap down at the open, however.  After averaging a gap down of 0.76% at the open of trading following the earnings release, the average stock that reported gained 0.21% from the open to the close.  (The gap down of 0.76% and the open to close gain of 0.21% adds up to the full-day decline of 0.57% mentioned earlier.)

Below is a table showing all 32 companies that reported Q2 numbers this week (through Thursday).  The list is sorted by one-day share price reaction from best to worst.  Alcoa (AA) had the best price reaction to earnings this week with a gain of 6.39% yesterday.  WNS Global (WNS) put up the second-biggest gain at 6.36%.  The next best-performing stocks in reaction to earnings this week only gained 3%+ — USB and HOMB.  Other stocks that reported this week that gained in response to their earnings reports include Morgan Stanley (MS), Goldman Sachs (GS), Taiwan Semi (TSM), Johnson & Johnson (JNJ), and JP Morgan (JPM).

On the downside, AngioDynamics (ANGO) saw the worst share price reaction to earnings this week when it fell 11.51% on Thursday.  Sleep Number (SNBR) was second-worst with a one-day drop of 9.19% yesterday as well.

While MS, GS, and JPM all posted gains in reaction to earnings this week, other banks like Citi (C), Wells Fargo (WFC), and Bank of America (BAC) reacted negatively with each falling 4% or more.  Click here to view Bespoke’s premium membership options for our best research available.  Our Earnings Explorer tool that gives you access to the information in this post is available fully at the Bespoke Institutional level.

Sentiment changes were relatively uneventful this week.  Bullish sentiment rose 3.68 percentage points to 30.84%. That is a second straight weekly increase for bullish sentiment and the first time that it has risen above 30% since June 11th.  That is still below the historical average of ~38%, but for the first time in four weeks, bullish sentiment came within one standard deviation of its long-term average.

The gains in bullish sentiment were met with a smaller gain in bearish sentiment which rose from 42.67% to 45.37%.  Although higher, that is right in the middle of the past month’s range and not any sort of significant uptick week over week. But unlike bullish sentiment which is finally back within a standard deviation of its historical average, bearish sentiment remains elevated above its historical average of 30.5% by one standard deviation for a fifth consecutive week. That has now been the case for 17 of the past 20 weeks.

The gains to bulls and bears borrowed from those formerly reporting as neutral. Neutral sentiment fell 6.38 percentage points this week. That was the largest week over week decline since the first week of March. Now at 23.79%, neutral sentiment has reversed all of its gains of the past month and a half as it sits at its lowest level since May 7th. Click here to view Bespoke’s premium membership options for our best research available.

Following up on yesterday’s New York Fed reading on the manufacturing sector, this morning we got the manufacturing numbers from the neighboring Philadelphia Federal Reserve bank region. Similar to the Empire Fed’s reading for six months out, the Philly Fed’s index for General Business Conditions pulled back a bit in July falling to 24.1 from 27.5 in June.  In absolute terms, that was the least volatile one month swing in the index since November of last year.  Additionally, although it indicates a slower rate of improvement in July than June, it still indicates that the region’s manufacturing sector expanded for a second consecutive month after three months of contractionary activity.

Although the headline number fell in July, the internals paint a much more positive picture.  Almost every category is now showing an expansionary reading with the exception of Inventories and Delivery Times, though both of those in contraction is not necessarily negative. Granted negative readings of these two, as well as a sizeable drop in Shipments, did contribute to the weakness in the July headline number.

This month’s release indicated solid overall demand with New Orders surging to 23 from 16.7 last month.  Unfilled Orders also rose; moving back into expansion territory after four months of contraction. Meanwhile, Shipments were down 10 points to 15.3, but that is still a firmly expansionary reading.

In addition to the strong levels of those indices, respondents reaffirmed the strength in demand by reporting higher prices for the second month in a row in terms of both prices received and paid.

As previously mentioned, both Delivery Times and Inventories showed contractionary readings this month, but that again is not necessarily a bad thing. The Philly Fed’s index on delivery times has fluctuated between positive and negative readings in recent months while other Federal Reserve regions have seen their equivalent readings surge to extremely elevated readings (albeit lower more recently) pointing to supply chain disruptions and longer lead times. The tip into negative territory for the Philly Fed’s index of Delivery Times indicates shorter delivery times and potentially some further normalization in supply chains. Additionally, the index for Inventories fell to its lowest level since September of 2016. That indicates large inventory drawdowns which reasonably can be evaluated as a result of a pick up in demand given the increase in other areas of the survey.

As with yesterday’s Empire Fed report, one of the major highlights of this month’s Philly Fed report was the massive increase in readings on employment.  The index for Number of Employees and Average Workweek were the categories to see the biggest increases in this month’s survey returning to positive territory. For these two respective indices, this month’s gains were also some of the largest of all reports since the beginning of the survey. In fact, for both indices, there have only been two months with higher monthly increases. For both indices, one of those months was this past May’s report. As for the other month, the other larger monthly gain for the index for Number of Employees was May of 1975 and for Average Workweek it was June of 1970. These huge jumps also bring both indices into the upper 90th percentiles of all readings. In other words, Philly area manufacturers seem to have not only brought people back to work but also are returning to longer workweeks. Click here to view Bespoke’s premium membership options for our best research available.

The Department of Labor released weekly jobless claims this morning and the results were mixed.  For initial claims, they remain stubbornly above 1 million at 1.3 million. That was above expectations of 1.25 million but was still another decrease week over week, making it a record fifteenth streak week with lower jobless claims on a seasonally adjusted basis. This week was also yet another example of how even though claims are improving, the pace of improvement has slowed dramatically. In fact, claims only fell 10K this week. That is the smallest decline of these past 15 weeks.

Although the seasonally adjusted number showed a small improvement, actual reported claims on a non-seasonally adjusted basis actually rose from 1.395 million to 1.503 million. That was the highest reading since the first week of June. Additionally, that increase was the first time that jobless claims (NSA) rose since the last week of March, snapping a record streak of 13 consecutive weeks with lower claims.

Given continuing claims are lagged an additional week, they would not reflect that uptick as that reading continued to fall.  Seasonally adjusted continuing jobless claims now total 17.34 million which is the lowest since the second week of April.

Looking at claims on a state by state basis, the main drivers of higher NSA claims this week have been some of the states with the largest increases in COVID cases like California, Georgia, and Florida. In the case of Florida, it saw a massive increase in first time jobless filings, nearly doubling from 66,941 last week to 129,408 this week. Meanwhile, Texas is bucking that trend with one of the largest improvements in claims despite higher case counts.  As for continuing claims in the week ending July 4th, Florida, California, Georgia, Pennsylvania, and Texas, have all seen the largest increases in continuing claims. New York, North Carolina, and Texas on the other hand have seen the biggest declines. Click here to view Bespoke’s premium membership options for our best research available.