We certainly had some volatility and a market mood swing last week, as the Dow Jones Industrial Average lost 2.1 % (over 700 points) on Monday, but then ended the week at a record high with its first ever close above the 35,000 milestone. For the weekly return, the Dow rose 1.1% to its new record high of 35,061.55. The other major indices also closed out the week at record highs, with the NASDAQ Composite jumping 2.8% to 14,836.99 and the Standard & Poor’s 500 Index gaining 2% to 4,411.79.
The Monday swoon can be blamed partly on worries over the Delta variant of Covid-19 and its impact on the economy, while the rebound to record highs was fueled by an easing of those worries, a buy-the-dip mentality, and corporate earnings that are coming in strong.
Looking at earnings season so far: For the second quarter of 2021, with nearly a fourth of the Standard & Poor’s 500 companies having already reported results, 88% have reported a positive earnings surprise and 86% have reported a positive revenue surprise – the blended earnings growth rate is 74.2%, which if it holds up would mark the highest year-over-year earnings growth rate since 2009 – according to data from FactSet Research.
The week ahead is the busiest week for earnings reports, with over 160 S&P 500 companies scheduled to announce quarterly results. The spotlight will be on big tech companies, with Alphabet, Apple, and Microsoft scheduled to report results tomorrow, followed by Amazon and Facebook later in the week. Away from big tech, other notable companies reporting include Boeing, Caterpillar, McDonald’s, Procter & Gamble, Pfizer, General Electric, Hershey, Visa, Chevron, and ExxonMobil.
To economic data out this week – we’ll get numbers on June New Home Sales, June Personal Income, and June Durable Goods – but it is the GDP report that will be most important. Second quarter Gross Domestic Product is scheduled to be released on Friday by the Bureau of Economic Analysis, with consensus estimates looking for a growth rate of over 9% as the economy rebounded from the pandemic induced recession.
Markets will also be following the Federal Reserve’s two-day meeting beginning tomorrow, followed by their statement on monetary policy Wednesday. No changes in interest rates are expected, but investors will be looking for indications/discussion as to when the central bank could begin tapering (reducing its bond buying).
As always, call us with any questions or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC