Earnings/Market Action – Monday Morning Market Memo – February 1, 2021

Earnings/Market Action – Monday Morning Market Memo – February 1, 2021

Good morning,

Looking at last week’s earnings reports from some of the largest and mostly widely followed companies: Microsoft beat on both the top and bottom lines, showing revenue growth of 17% on an annualized basis; Apple also posted earnings and revenues that were better-than-expected, while booking revenue of more than $100 billion for the first time ever; Facebook beat on their earnings/revenues as well, and also reported more monthly active users (MAU’s) than forecast; Tesla missed earnings estimates while beating the revenue estimates, its shares declined after the report and for the week.

Looking at overall earnings results so far (according to FactSet): For the fourth quarter of 2020, with 37% of the companies in the S&P 500 having reported actual results, 82% have reported a positive EPS (Earnings Per Share) surprise, which if 82% is the final percentage, it will mark the second-highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008.

Away from earnings and with an update on the COVID-19 front, Johnson & Johnson released data from its phase 3 trial of its vaccine candidate, indicating it’s 66% effective overall at preventing moderate to severe COVID-19.  Johnson & Johnson also reported the vaccine to be 85% effective overall in preventing severe disease.  This disappointed some investors as other vaccines have show higher efficacy rates and the stock declined 3.6% following the news.  Normally, these above items would have taken center stage in the stock market.  However, all of this news seemed to take a backseat to trading and issues related to GameStop, which was the talk of the “street” AND of the “town”.

Despite plenty of news in mega cap stocks, it was GameStop that garnered the most attention last week, with its shares gaining 400% – pushed up by online/retail traders and a short-squeeze.  News of this volatility/speculative trading/high volume/short squeeze, along with trading restrictions put on this and other securities by some brokers, dominated the financial news last week. Some market participants became concerned this volatility and speculative trading could rattle the market and possibly lead to implications for the broader market.  All of this action was covered not just in financial media, but also hit the mainstream print/television news in a way we have not seen in many years.  Putting everything together and when it was all said and done last week, the stock market finished lower.

Stocks posted notable losses heading into the weekend last Friday (the Dow Jones Industrial Average dropped 620 points), finishing up a roller-coaster week that saw all 3 major stock indices decline by over 3%, which was their worst weekly performance since last October.  The Dow fell 3.27% to 29,983, the Standard & Poor’s 500 Index dropped 3.31% to 3,714 and the NASDAQ Composite shed 3.49% to 13,071.  Looking to the week ahead – it’s another big week for earnings reports, along with some key economic data scheduled to be released.

On the earnings front, notable companies reporting this week include AlphabetAmazon.comAlibabaThermo Fisher ScientificChipotle Mexican GrillPfizerPayPal HoldingsFord MotorExxonMobilUnited Parcel ServiceeBayMerckGrubhubGilead Sciences and Philip Morris International.  Key data to watch for this week includes December Construction SpendingDecember Durable GoodsDecember Factory Orders, and the January Jobs Report.  Expectations are for the economy to have added about 100,000 jobs last month and for the unemployment rate to hold steady at 6.7 percent.

As always, please do not hesitate to contact us with any questions you may have, or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC