Market/Earnings Update – Monday Morning Market Memo – April 26, 2021

Market/Earnings Update – Monday Morning Market Memo – April 26, 2021

Good morning,

After somewhat volatile trading, the three major stock market indices finished last week slightly lower.  The Dow Jones Industrial Average and the Standard & Poor’s 500 Index both had four-week winning streaks snapped, with the Dow falling fell ½ percent to 34,043.49 and the S&P declining .1% to 4,180.17.  The NASDAQ Composite dipped .3 percent to 14,016.81.  Some of the volatility last week stemmed from media reports Thursday that capital gains taxes would rise sharply (to as much as 43.4%) for high earners.  Stocks rebounded on Friday however, with the Dow gaining nearly 230 points to reclaim some of the lost ground, as consensus settled around the thought that the most likely outcome is for less of an increase in the tax.

Also in the news last week, were some notable corporate earnings reports as earnings season is ramping up.  To get a flavor for some earnings action from last week:  Harley-Davidson stock price sped higher, gaining approximately 10% after the company posted a beat on earnings and raised its sales outlook; Johnson & Johnson gained a bit, as shareholders felt better after the company reported both earnings and revenues that came in ahead of expectations; owners of IBM were not feeling blue as the stock rose almost 4% after the company reported better-than-expected results on both the top and bottom lines; AT&T stock rose over 4% after the company rang up some nice numbers, posting earnings, revenues and cash flow that exceeded analyst estimates;  Netflix shareholders on the other hand, didn’t like what they were watching, as the shares fell over 7% due to slower subscriber growth.

Looking at the aggregate earnings results so far, according to FactSet – for the first quarter of 2021, with 25% of the companies in the S&P 500 reporting actual results, 84% have reported a positive EPS (earnings per share) surprise and 77% have reported a positive revenue 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 this metric in 2008.  So the overall message is “so far, so good”, but we still have a long way to go.

Looking to the week ahead, get ready for a deluge of earnings reports!  It’s the busiest week of earnings season as more than one-third of the companies in the S&P 500 are scheduled to report.  While there are far too many names reporting to list here, expect big tech to garner the most attention.  MicrosoftAppleFacebookAlphabet, and will highlight the week’s action.  Earlier in the pandemic, gains from large technology companies offset weakness in other sectors – so we’ll be watching money flows to see whether big tech takes another leadership position – or if there is a shift to other sectors of the stock market which may benefit more from the reopening.

Also this week is a Federal Reserve policy meeting followed by a press conference on Wednesday afternoon hosted by Chair Jerome Powell.  We don’t expect any changes in policy and will be watching for an update/confirmation that the Fed is willing to put up with a little more inflation than usual.  But while the Fed is expected to maintain its accommodative tone, keep in mind that any surprises here could be market moving.

As always, don’t hesitate to contact us with any questions or concerns you may have, or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC