One of the things we love/hate about the stock market is that you never know what is going to unexpectedly develop or unfold. We are all preparing and geared up for earnings season to measure the strength of the economy and whether earnings can be a tailwind for the bull market. Things got off to a fairly good start with the banks generally doing better-than-expected, and reports last week by Intel, American Express, and International Business Machines that topped estimates. According to FactSet, with 17% of the companies in the Standard & Poor’s 500 Index having already reported actual results, 73% have reported a positive surprise, which is above the 5-year average.
The focus of market quickly and unexpectedly moved away from earnings however, as the coronavirus (a new respiratory virus first identified in Wuhan, China) is now front and center. Stocks fell last Friday after the second case of the virus in the U.S. was confirmed by the Centers for Disease Control and Prevention. For the week, the Dow Jones Industrial Average fell 1.2%, the NASDAQ Composite dropped .8%, and the S&P 500 lost 1%. The spread of the virus poses both a human risk and an economic/market risk, the impact of which is worrying investors and weighing on investor sentiment.
The extent to which earnings will grab market attention will depend in large part on developments with the coronavirus, but the week ahead is what we consider the biggest week of earnings season. Companies scheduled to report include 3M, Apple, Pfizer, Starbucks, AT&T, Facebook, Microsoft, Mastercard, PayPal, Tesla, Amazon.com, Visa, Caterpillar, Honeywell, and Chevron.
All the best – Southport Station Financial Management, LLC