Stocks opened little changed. Market participants will remain focused on whether lawmakers in Washington, DC, can agree on a fifth coronavirus relief package. Meanwhile, several executive actions taken by the White House to provide relief without involving Congress sparked debates about the legality and logistics of the move. LPL Research continues to expect an agreement soon. US-China tensions remain high, with TikTok, Tencent, and tit-for-tat Hong Kong sanctions grabbing headlines. China’s Shanghai Composite rose 0.8%, Hong Kong’s Hang Seng dipped 0.6%, and Japan’s markets were closed for holiday. European stocks were slightly higher in midday trading.
Earnings bar too low. S&P 500 Index earnings for the second quarter are tracking to a 34% year-over-year decline, an impressive 11 percentage points above estimates when earnings season began. The earnings beat rate (83%) and average positive surprise (23%) are both well above historical averages. Forward 12 months’ estimates have risen 1.5% since July 1, an indication that second half estimates may be too low.
Week ahead. This week’s economic calendar features retail sales for July on Friday. Other data of note includes today’s Job Openings and Labor Turnover (JOLTS) report, Tuesday’s National Federation of Independent Business (NFIB) Small Business Index, consumer and producer inflation on Tuesday and Wednesday, jobless claims on Thursday, and University of Michigan consumer sentiment on Friday. Only 11 S&P 500 companies are scheduled to report earnings this week as second quarter earnings season winds down.
COVID-19 news. New daily cases in the United States jumped 6.3% on Sunday compared with the prior week. The 7-day average has fallen by double digit percentages for five straight days and hospitalizations have been falling steadily since the recent peak on July 25 (source: COVID Tracking Project). Australia had its deadliest day ever, according to Johns Hopkins data, while the UK and Italy affirmed plans to open schools in September, according to a Bloomberg report.
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