The S&P 500 continues to grind higher, due a strong 2Q earnings season that has surprised on the upside.  With 80% of S&P 500 companies having reported results up to this point, S&P 500 2Q earnings are now expected to grow by 10.2% for the quarter versus estimates of 6.5% on June 30. Also, sales growth

Congress announced Monday a timeline for tax changes by the end of 2017

is expected to finish up 5.2%, with the largest number of companies beating on the top line since at least 2008 (according to FactSet). Margins have also expanded, and full year 2017 S&P 500 earnings estimates are up to $131.26 (would be 10.5% growth y/y).The stronger than expected earnings has relieved political disappointment out of D.C. thus far, with market participants largely ignoring White House turnover and health care failure. While Republicans may make another attempt on health care after the August recess, investors will likely pay closer attention to budget resolution and the path of tax reform this Fall. On Monday, Congress announced a timeline for tax changes by year end.

Technical: Overall, technical trends remain healthy; however there are some minor divergences. The S&P 500 Equal-Weight Index and Small Cap index have not been able to make relative strength gains during the market’s advance this year, and broke to new relative lows today. This suggests a lack of market breadth beneath the surface and could signal some near term consolidation for the cap-weighted S&P 500. However, with numerous levels of technical support nearby (and an improving economic and earnings backdrop), we would view pullbacks opportunistically.

Macro Economic growth continues to look healthy. US 2Q GDP was reported at 2.6%, and estimates for the full year suggest growth around 2.2% (up from 1.5% last year). Also, manufacturing readings came in line with July estimates and remain solid. Looking forward, July change in nonfarm payrolls is reported tomorrow and consensus estimates are for a 180K increase. Global economic improvement also remains supportive, and has sustained its momentum (chart on right), based on PMI data out over the past week.

Economic data reported in the past week (actual vs estimate):



– GDP Annualized q/q (2Q A): 2.6% vs 2.7%, 1.2% prior

– Personal Consumption (2Q A): 2.8% vs 2.8%, 1.9% prior

– Core PCE q/q (2Q A): 0.9% vs 0.7%, 1.8% prior

– U of Michigan Sentiment (Jul F): 93.4 vs 93.2, 93.1 prior


– Chicago PMI (Jul): 58.9 vs 60.0, 65.7 prior

– Pending Home Sales m/m (Jun): 1.5% vs 1.0%, -0.7% prior

– Pending Home Sales y/y (Jun): 0.7% vs 0.7% prior

– Dallas Fed Manf. Activity (Jul): 16.8 vs 13.0, 15.0 prior


– Personal Income (Jun): 0.0% vs 0.4%, 0.3% prior

– Personal Spending (Jun): 0.1% vs 0.1%, 0.2% prior

– PCE Core m/m (Jun): 0.1% vs 0.1%, 0.1% prior

– PCE Core y/y (Jun): 1.5% vs 1.4%, 1.5% prior

– Markit US Manufacturing PMI (Jul F): 53.3 vs 53.2, 53.2 prior

– ISM Manufacturing (Jul): 56.3 vs 56.5, 57.8 prior

– Construction Spending m/m (Jun): -1.3% vs 0.4%, 0.3% prior


– Initial Jobless Claims (Week): 240k vs 243k, 245k prior

– Markit US Services PMI (Jul F): 54.7 vs 54.2, 54.2 prior

– Markit US Composite PMI (Jul F): 54.6 vs 54.2 prior

– ISM Non-Manf. Composite (Jul): 53.9 vs 56.9, 57.4 prior

– Factory Orders (Jun): 3.0% vs 3.0%, -0.3% prior

– Durable Goods Orders (Jun F): 6.4% vs 0.0%, 6.5% prior

– Durables Ex Transportation (Jun F): 0.1% vs 0.2% prior

Disclaimers and Disclosures

Investing Risks:  The risk of loss from investing in securities (stocks, ETFs, mutual funds, etc.), bonds, options, futures, and forex or related products, can be substantial.  Investors must consider all relevant risk factors, including their own personal financial situation, before investing.Investments in bonds and fixed income products are subject to various risks (including liquidity, interest rate, financial, and inflation risks) and special tax liabilities.  

Options Risks:  Options involve risk and are not suitable for everyone.  Options trading privileges are granted at the account level by your custodial broker and are subject to review and approval.  Not all account holders will qualify.  Before trading options, a person must receive a copy of Characteristics and Risks of Standardized Options. Individuals should not enter into options transactions until they have read and understood the risk disclosure document, Characteristics and Risks of Standardized Options, which can be found on our website  Copies may be obtained by contacting your broker or the Options Clearing Corporation.

Spreads, Straddles, Strangles, and other multi-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return.  These are advance option strategies and often involve greater risk, and more complex risk than basic options trades.  

Portfolio Margin:  A portfolio margin account generally permits greater leverage in an account, and greater leverage has the potential to create greater losses in the event of adverse market movements.  Portfolio Margin, or Risk-Based Margin, is a margin methodology that sets margin requirements for an account based on the greatest projected net loss of all positions in a “security class” or “product group” as determined by the custodial broker’s theoretical pricing model using multiple pricing scenarios.  These pricing scenarios are designed to measure the theoretical loss of the positions given changes in both the underlying price and implied volatility inputs to the model.  Clients participating in portfolio margin will be required to sign an agreement acknowledging that their security positions and property in the portfolio margin account will be subject to the client protection provisions of Rule 15c-3 under the Securities Exchange Act of 1934 and the Securities Investor Protection Act.  Clients will be subject to minimum equity requirements by not only the custodial broker but also the managing firm.

General Disclosures:  Any strategies discussed in this presentation, including examples using actual securities and price data, are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell specific securities or strategies.

Investors should carefully consider the investment objectives, risks, charges, and expenses before investing in any investment product.  To obtain a prospectus containing this type of information as well as other important information, contact your custodial broker.  Please read the prospectus carefully before investing.  

You should discuss any/all implications of investing in such products with your custodial broker, financial adviser/advisor, and/or tax advisor.  Past performance is not indicative of future results.  

Third Party Information:  This presentation may utilize or refer to third party data.  In such a case, let it be known that MSCM, LLC. does not control, nor has it developed the content being referred to, and does not make any warranty, express or implied, as to the accuracy, usefulness, timeliness or even the continued availability or existence of said information/content created or maintained by others.  Opinions expressed by others are not necessarily those of MSCM, LLC., nor does MSCM, LLC. endorse, warrant, or guarantee products, services or information described or offered by such firms.