Second-Quarter Earnings Season Begins

July 22, 2019 Chatham Financial

Prior Week Summary

A shaky start to second-quarter corporate earnings and mixed economic data sent U.S. equity markets lower last week, ending a two-week rally in the S&P 500. Investors were encouraged early in the week as updated figures for the Empire Manufacturing Survey and retail sales topped analyst forecasts, but were disheartened when industrial production, housing starts, and consumer confidence measures fell below consensus estimates. Separately, second-quarter earnings results have been largely mixed thus far with analysts forecasting declines in per-share earnings growth for eight of the eleven GICS sectors.

A number of Federal Reserve officials spoke last week offering a range of views on the appropriate course for monetary policy. Eric Rosengren, President of the Federal Reserve Bank of Boston, pushed back on the notion that the Fed needs to cut interest rates saying, “The U.S. economy is not at that point, the economy is actually quite reasonable at this stage. So, if that were to change, I’d be happy to ease at that point. But I don’t want to ease if the economy is doing perfectly well without that easing.” The Vice Chairman of the Federal Reserve, Richard Clarida, offered statements more in line with the markets current expectations for Fed easing, noting, “you don’t have to wait until things get so bad to have a dramatic series of rate cuts.” The Fed Funds futures market is pricing in a 100% chance for a rate cut at the July FOMC meeting.

The Look Forward

All eyes will be on the release of the 1st estimate of second-quarter GDP on Friday. Consensus estimates are calling for 1.8% growth in the second quarter, over a full percentage point lower than the pace seen in the first quarter. Additionally, market participants will be looking forward to the release of updated figures on new and existing home sales, wholesale inventories, and durable goods orders, among others.

Rates Snapshot

Sources: Bloomberg Finance L.P., (Treasuries) Chatham Financial (Swap Curves), FHLB Boston, Chicago, Dallas, Des Moines for FHLB Advance Rates. Wells Fargo Brokered CD Indications.


Market Implied Policy Path (Overnight Indexed Swap Rates)

Source: Chatham Financial


Fixed Income Snapshot

Source: Bloomberg Finance L.P.



Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved. 19-0190

Previous Article
ECB Holds Steady
ECB Holds Steady

U.S. equity markets rebounded last week buoyed by better-than-expected corporate earnings results and U.S./...

Next Article
Powell Speaks to Congress
Powell Speaks to Congress

Federal Reserve Chairman Jerome Powell did little to push back against the market’s expectation of a July r...


Subscribe to Chatham's Weekly Market Insights

First Name
Last Name
Company Name
Thank you!
Error - something went wrong!