LIVE MARKETS-US earnings revisions show positive trend, says Morgan Stanley

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US EARNINGS REVISIONS SHOW POSITIVE TREND, SAYS MORGAN STANLEY

While stocks may have already priced in a summer slowdown in macroeconomic data and earnings results, some key indicators including one related to earnings expectations are improving and could bode well for the market, writes Michael Wilson, equity strategist at Morgan Stanley, and other strategists at the firm.

"We are acutely focused on the upward inflection in earnings revisions breadth, which is showing no signs of letting up," they say in a note Monday.

The gauge is at -10%, an improvement from -25% at the April lows, and "it leads EPS surprise by 8 months," he writes.

A weaker dollar could become a tailwind for earnings and the market as well.

"Our FX strategists see the DXY (the U.S. dollar index) going to 91 by the middle of next year, which in and of itself, should take revisions breadth positive—a clear tailwind for the market," he writes.

Another positive for the market is that "cyclicals and higher beta growth areas" have outperformed the broader market since the April lows. At the same time, defensives have lagged, he writes.

Meanwhile, according to LSEG data as of Friday, analysts see earnings growth for S&P 500 .SPX companies for the quarter ending June 30 at 5.6%. At the start of April, they saw earnings growth for that quarter at 10.2%. Companies are expected to start reporting on the quarter in mid-July. Earnings growth for the quarter ended in March was 13.7%.

(Caroline Valetkevitch)

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