Stocks Under a New President | Daily Market Update

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Wednesday, January 27, 2021

Top Story

Busy Day for Earnings

35 S&P 500 Index companies are slated to report Q4 earnings results today. Current earnings growth is tracking a roughly 5% decline year over year (source: FactSet). So far this season, 68 companies have reported positive earnings growth while 42 have reported negative growth.

Daily Insights

Stocks sink ahead of Federal Reserve meeting

S&P 500 Index opens 1% lower today, and the Russell 2000 Index is underperforming.

  • European stocks are also firmly lower in midday trading.
  • Asian markets closed mixed, with Hong Kong the underperformer.

First Fed policy meeting of 2021 concludes today

The Federal Reserve (Fed) policy is practically a lock to remain unchanged, and meaningful changes in the Fed’s bond purchase program are unlikely.

  • The Fed’s main goal will be to reassure markets it is not considering reducing policy support in the near term.
  • Post-meeting materials will not include updated projections.
  • The meeting will be followed by a press conference at 2:30 p.m. ET by Fed Chair Jerome Powell, which will give him an opportunity to tweak the Fed’s messaging.

A closer look at stocks in presidential cycles

This is the first year of a new four-year presidential cycle. Historically, stock returns in the first year have tended to be weak with a new president, while February has been the worst month of the year under a new president. We look at this phenomena later today on the LPL Research blog.

Technical update

The S&P 500 traded in a tight range Tuesday and continued to struggle to eclipse a key resistance level at 3852. Stocks are falling in early trading and will first look to hold the Monday intraday low at 3797. Below that, support can be found at 3749.

COVID-19 news

The United States reported 143,000 new COVID-19 cases on Tuesday, the third straight day below the 7-day moving average (source: COVID Tracking Project).

  • Hospitalizations have fallen in almost every state over the past two weeks.
  • Spain and France continue to be hotspots in Western Europe.

Positive Trends Send Strong Signals

This week’s Market Signals podcast discusses why positive COVID-19 news, solid small caps performance, high stock valuations, and more positive data trends are sending strong signals for 2021. Watch Market Signals: Positive Trends Send Strong Signals for 2021.

 

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