Earnings Season is Here | LPL Daily Market Update

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Monday, April 12, 2021

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In April, we increased our forecast for U.S. gross domestic product (GDP) growth in 2021 to 6.25%—6.75%, up from 5%—5.5%, due to prospects for a full reopening of the U.S. economy, massive stimulus, and Federal Reserve (Fed) support.

  • We have also raised our S&P 500 Index earnings per share (EPS) forecast for 2021, to a range of $175–$177.50, up from $170.
  • We increased our year-end forecast for the 10-year Treasury yield to a range of 1.75%—2.00%, up from 1.25%—1.75%.
  • We anticipate some downward pressure on valuations at higher interest rate levels and a pickup in volatility during year two of the bull market is reasonable to expect.

Daily Insights

U.S. stocks little changed ahead of bank earnings and a big week for Treasury yields.

  • S. Treasury to auction roughly $150 billion in debt today ahead of tomorrow’s Consumer Price Index (CPI) release.
  • European stocks are mostly lower in midday trading with Germany outperforming.
  • Asian markets were under pressure overnight as rising COVID-19 cases and the re-imposition of certain lockdown measures in Japan and Korea weighed on stocks.

The Earnings Boom is Here

The outstanding fourth-quarter earnings season we had in 2020 is a tough act to follow, but 2021’s first quarter has the makings of another potentially great earnings season. Find out more in today’s Weekly Market Commentary, available at 1 p.m. ET.

Earnings season kicks off this week

  • 23 S&P 500 Index companies report first quarter results this week.
  • Corporate America is poised for big earnings gains given strong economic growth.
  • Recent positive trends in company guidance and analysts’ estimates may signal upside to expectations.
  • Easier comparisons against the first quarter of 2021 put a 30% year-over-year increase in S&P 500 earnings per share potentially within reach.

Week ahead

The following economic data is slated to be released this week:

  • Monday—Treasury Budget (Mar.).
  • Tuesday—Consumer Price Index (Mar.) and labor workweek statistics (Mar.)
  • Wednesday—Federal Reserve Beige Book and export/import prices (Mar.)
  • Thursday—Weekly initial and continuing claims, retail sales (Mar.) and industrial production (Mar.), business inventories (Feb.), National Association of Home Builder’s Housing Market Index (Apr.)
  • Friday—Housing starts and building permits (Mar.), University of Michigan sentiment (Apr.)

Technical update

The S&P 500 just posted its best week since early February, advancing 2.7% and closing Friday at its high point of the week. Market breadth remains impressively strong, with more than 95% of the stocks in the S&P 500 above their 200-day moving averages, though overly optimistic sentiment is becoming more of a risk short-term.

COVID-19 news

The United States reported 48,000 new COVID-19 cases on Sunday, up 31% week over week although Easter-related disruptions skew the week over week data (source: New York Times).

  • Over the past week, cases have risen by roughly 9% where the highest rates of growth continue to be seen in Midwestern states such as Michigan, Minnesota, and Illinois.
  • The Centers for Disease Control and Prevention (CDC) reports that just over 35% of the U.S. population has received at least one dose of the vaccine, administering roughly 3 million shots per day.
  • After re-imposing restrictions on activity, cases in Italy and France appear to be on the decline.
  • The United Kingdom has reopened non-essential retail as cases have fallen 98% from their January peak.

Raising Economic And Market Forecasts…Again

On the LPL Market Signals podcast, Equity Strategist Jeff Buchbinder and Asset Allocation Strategist Barry Gilbert update forecasts based on how the economy’s recovery from the pandemic, aided by vaccine distribution, massive stimulus, and the desire to return to normal, continues to surpass expectations.

 

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