Potentially Strong Earnings Season Ahead | LPL Daily Market Update

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Tuesday, April 13, 2021

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Earnings Season Is Here

LPL Research discusses why they think another very solid earnings season is on the horizon in the latest LPL Market Signals.

Daily Insights

U.S. stocks little changed as health officials recommend pausing the use of Johnson & Johnson’s COVID-19 vaccine

  • Centers for Disease Control and Prevention (CDC) and Food and Drug Administration (FDA) officials are reviewing data involving six reported cases of blood clots.
  • European markets are little changed in midday trading with the United Kingdom underperforming.
  • Asian stocks were mostly higher overnight with China underperforming on weaker than expected trade data.

Is there seasonality in the bond market? It would appear so

  • The most bullish months for 10-year Treasuries have historically been May through September.
  • Changing investor risk sentiment towards the middle of the year could make Treasury securities more attractive.
  • While the data suggests that now could be a good time to start adding interest rate risk to portfolios, in our view, the historical seasonal patterns are unlikely to hold this year.
  • For more on our analysis of the seasonality in fixed income markets see today’s LPL Research Blog, available after 12p.m. ET.

Consumer prices increase more than forecast in March

  • The consumer price index (CPI) increased by 0.6% in March on a month over month basis versus Bloomberg consensus forecasts of 0.5%.
  • Core CPI, which excludes volatile food and energy prices, rose 0.3% month over month versus Bloomberg estimates of 0.2%.
  • Year over year data for core CPI—skewed by base effects from the historically weak CPI data at the onset of the pandemic in 2020—rose 1.6%, a touch higher than Bloomberg forecasts of 1.5%
  • While CPI beat survey estimates, the initial reaction from the bond market remains muted. The yield on the 10-year Treasury bond has declined from overnight highs.

Small business optimism rises to highest level since November 2020

  • The National Federation of Independent Businesses Small Business Optimism Index (NFIB) for March climbed from 95.8 to 98.5, just below the consensus estimate.
  • Sales expectations and plans to expand improved, but businesses noted difficulty finding qualified workers despite slack in the labor market.
  • The index is slowly reversing post-election and COVID-19 surge declines but still has a ways to go to reach October 2020 levels.

Technical update

Markets paused to begin the week, with the S&P 500 Index ending near flat on Monday. The benchmark index is now at its most overbought since early September based on RSI-14, a bullish long-term sign. However, it is an additional point that supports a consolidation of gains over coming weeks.

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. Learn more in this week’s Weekly Market Commentary.

 

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All index and market data are from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

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