Whilst there were economic data releases for the market to get their teeth into, this week has been one where markets have been very much driven by corporate earnings releases. In the US we saw the S&P 500 post a daily loss in excess of 2%, the first which it had seen in 356 trading days. This was the longest streak seen since 2007.

Causing the upset was the digesting of the latest results from Tesla and Alphabet. These two stocks are the first to announce of the Magnificent 7 and unfortunately the market did not take kindly to what they heard. Tesla reported its lowest profit margin in 5 years and earnings for the second quarter were behind expectations. Alphabet also saw its share price fall. Whilst their earnings were ahead of investments, investors did not take kindly to the forward guidance provided, warning that advertising growth was slowing and that the company was likely to have high capital expenses for the year.

Whilst the move in the market grabbed all the attention, it is perhaps worth looking back to see the typical frequency of such moves. Analysis from Bloomberg shows that there was only one decline of more than 2% in 2023, and therefore the excitement over this one can perhaps be understood. In 2022 however there were 23 falls of this magnitude, 25 in 2020, 28 in 2009 and 41 in 2008. I guess the question investors are asking themselves is whether this move is the start of something to come or were they simply using these results as an excuse to indulge in some profit taking.

Figures from Charles Schwab to the 24th of July suggest that despite the results of these two companies the S&P 500 earnings beat rate remains high at 79%. Perhaps one figure to watch however is the revenue beat rate, which is at its lowest rate since the fourth quarter of 2016. Are the purse strings being tightened.

In the UK meanwhile it would appear that the consumer has yet to loosen their purse strings. After their savings purge during COVID, the Office for National Statistics (ONS) calculates the consumer still has excess savings close to 13% of the total annual income. That is some spending power indeed, is higher than that seen in the US where they have been exhausted, and at the same time perhaps explains the difference in economic growth rates between the two countries. This excess remains despite the fall in UK household debt to disposable income which has been seen. Is the British public keeping their powder dry for a rainy day?

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