Positive July-Sept. earnings season could stoke next market rally: Analysts

With the July-September earnings season underway, stock market analysts believe that the corporate earnings have largely turned a corner—barring the sectors which were directly hit by the virus, such as travel and tourism—and thus could power the next round of market rally. 

As the July-September earnings season kicked off roughly a week ago and some companies are still filing for their earnings reports for the March-June quarter, due to the delays caused by the coronavirus-related disruptions, a broad section of analysts bets on a brighter earnings season, propelling the next leg of the market rally that began recently. 

They believe that recovery in manufacturing and services activities from the last two months of March-June quarter will continue into the July-September quarter, as indicated by the gauges such as the Purchasing Mangers’ Index (PMI) and Index of Industrial Production (IIP). 

Investors and analysts alike expect July-September could mark a turnaround in corporate earnings, after they bottomed in the April-June quarter, as the economy remained shut for nearly half of that period, due to the coronavirus-related lockdowns. 

But it quickly rebounded since the second half of May with the gradual easing of lockdowns and powered through end-September, nearly all economic readings showed. 

However, the curfews in the most populous Gampaha district since early October, in view of a new coronavirus cluster, could somewhat soften the pace of growth, albeit the industrial activities in the region continue largely unabated, complying with the health guidelines.