Earnings Deluge Ahead – Monday Morning Market Memo – October 26, 2020

Earnings Deluge Ahead – Monday Morning Market Memo – October 26, 2020

Good morning,

The major stock market indices opened notably lower this morning.  Two major factors weighing on the market are rising coronavirus cases and shrinking optimism there will be another economic stimulus package before the election.  While these two issues will remain focal points for the market, a deluge of earnings reports coming our way will compete for investor attention.

We are in the thick of earnings season as more than 1/3rd of the companies in the Standard & Poor’s 500 Index are scheduled to report results in the week ahead.  Companies due out with earnings this week include 3MBPCaterpillarMerckMicrosoftPfizerBoeingFord MotorGeneral ElectricMastercardVisaUnited Parcel ServiceKraft HeinzTwitterAbbVieChevronExxonMobilColgate-PalmoliveHoneywellPhillips 66, and Altria Group.

Thursday is undoubtedly the most anticipated earnings day ahead, as FAANG is in the spotlight – with FacebookAmazon.comApple, and Alphabet (parent of Google) reporting after the closing bell.

Looking at aggregate expectations for the third quarter of 2020, earnings for the Standard & Poor’s 500 companies are expected to decline 16.5%, which would mark the second largest year-over-year decline since the second quarter of 2009, according to FactSet Research.

Of course, earnings reports are a game of expectations, and on the bright side – with 27% of S&P 500 companies having already reported actual results, 84% have reported a positive Earnings Per Share surprise.  If 84% is the final percentage, it will tie the mark for the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking the metric in 2008.

Bottom line, it is NOT “all about the earnings” right now.  However, a large batch of earnings reports (and forward guidance) from major companies this week may prove to be market moving.  Get ready for an active week!

All the best – Southport Station Financial Management, LLC