Monday, July 12, 2021
What will companies do for an encore?
- After a stunning first quarter earnings season, we expect more good news this quarter.
- At the same time, we acknowledge the second quarter will almost certainly be the peak in earnings growth for this cycle.
- In this week’s Weekly Market Commentary, available at 1pm ET, we highlight three things to watch during earnings season.
US equities point toward a mixed open as investors await the beginning of second quarter earnings season
- The Nasdaq composite is higher as growth names continue their advance.
- European equities are mostly higher amid investor concern on how the COVID-19 Delta variant spread may affect the EU recovery.
- Asian markets finished higher as Japan (Nikkei) closed up over 2% even as new COVID-19 restrictions were initiated in Tokyo
Expect more great numbers this quarter
- Second quarter earnings season begins this week with 26 S&P 500 companies reporting results, mostly financials.
- S&P 500 Index earnings growth could easily exceed 70% for the quarter, fastest since 2009. FactSet’s consensus estimate is 64%.
- Earnings growth will benefit from easy comparisons to the lockdowns of the year-ago quarter and the economy’s reopening.
- The biggest earnings gains will come from sectors hurt most by the pandemic, including consumer discretionary (ex. E-commerce), energy, financials, industrials, and materials.
- The unusually large 7.3% increase in the second quarter estimate during the quarter and high number of S&P 500 companies issuing positive guidance bode well for positive surprises.
Week ahead. The following economic data is slated to be released this week:
- Tuesday: National Federation of Independent Business (NFIB) Small Business Index (Jun), Consumer Price Index (CPI, Jun), Treasury budget and workweek statistics
- Wednesday: Producer Price Index (PPI, Jun)
- Thursday: Weekly initial and continuing claims, industrial production, capacity utilization, and industrial production (Jun)
- Friday: Retail sales (Jun), University of Michigan Sentiment (Jul), business inventories (May)
- Federal Reserve Chair Jay Powell congressional testimony takes place on Wednesday and Thursday
- The S&P 500 hit record highs on Friday, spiking 1.1% in a broad-based advance led by cyclical value as Treasury yields responded positively to support.
- Advancers outnumbered decliners by more than 12:1 on the NYSE, the best daily reading since April 6, 2020.
- Key things to watch this week include whether or not interest rates can continue higher on the long end of the curve, and how banks respond to oversold conditions as earnings reports begin to roll in.
Tips For Young Investors
In this week’s LPL Market Signals podcast, LPL Director of Research, Marc Zabicki shares his journey and discusses ideas for navigating today’s markets for young investors.
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