The major stock market averages ended with gains last week – the Dow Jones Industrial Average rose 1% to 26,075. The NASDAQ Composite jumped 4% to 10,617 and the Standard & Poor’s 500 Index gained 1.8% to 3,185. The Dow would have finished negative on the week, except for a Friday rally of almost 370 points when the overall market rose on positive data analysis regarding the effectiveness of remdesivir in treating coronavirus and reducing the death rate – supporting the weekly market gains.
Last week’s rally is carrying over to this morning with the major averages all gaining about 1.5%. Investors are shrugging off increased cases of coronavirus and instead focusing on positive news on the vaccine front, reports of lower death rates, and looking at the glass as “half-full” in that we are avoiding broad based lockdowns. Along with following the path/course of the pandemic in the week ahead, we’ll get some high profile earnings releases.
Earnings season kicks off this week, highlighted by a list of major banks which are scheduled to report, including Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, and Bank of America. Away from financials we’ll get reports from companies such as PepsiCo, Domino’s Pizza, and Johnson & Johnson.
Looking at aggregate expectations for this round of earnings reports: For the second quarter of 2020, the estimated earnings decline for the Standard & Poor’s 500 Index is minus 44.6%, which would mark the largest year-over-year decline in earnings reported by the index since the fourth quarter of 2008, according to data from FactSet. Remember, reactions to earnings are in large part based on expectations, and the market is mostly looking at things based on 2021 earnings, realizing the effect the pandemic will have on earnings numbers for this year.
All the best – Southport Station Financial Management, LLC