We talked about the coming catalyst of Q1 earnings season.  Two of the big banks kicked it off today.

As we discussed, the bar has been set low, very low.  Wall Street and corporate America have set expectations for a contraction in S&P 500 earnings in the first quarter (compared to the same period a year ago).  Good for us, because this has set the table for positive surprises.

And two of the biggest U.S. based global money center banks started the ball rolling today. JP Morgan reported $2.65 against a $2.32 estimate.  And Wells Fargo reported $1.20 against a $1.08 estimate.

Remember, the economy was solid in Q1.  The Atlanta Fed estimates 2.3% growth for the Q1. We added 173k jobs a month.  PMIs reflected an expanding economy. And we had the biggest quarter for stocks in a decade in Q1.  As I said yesterday, with that backdrop, that’s a recipe for solid earnings growth, not earnings contraction.

Has the tone already been set today?  In the case of Wells Fargo.  The market was looking for earnings contraction, relative to Q1 of 2018.  We got 7% growth.  For JP Morgan, the market was looking for a 2% contraction in earnings (qoq).  Instead, we got 12% growth.

With that fuel, the stock market making new highs for the year, and just 1% from the October 3rd all-time highs.

As we end the week, let’s revisit this chart that we looked at last month, comparing the current market to 1995 — the last time the Fed flip-flopped after doubling rates into a low inflation, recovering economy.