Record High Closes into Earnings Season – Monday Morning Market Memo – April 13, 2021

Record High Closes into Earnings Season – Monday Morning Market Memo – April 13, 2021

Good Morning,

The stock market was able to shrug off some disappointing economic data last week, as the Producer Price Index rose by 1% in March, notably above expectations for a .05% increase, and initial jobless claims unexpectedly jumped to 744,000, compared to expectations of 694,000.  Instead of these numbers, investors focused on positives such as vaccine progress, a blowout March Jobs Report from the prior week, dovish comments from the Federal Reserve, and the outlook for strong corporate earnings.

Stocks started last week with a nice move up Monday morning in response to the March Jobs Report, which was released when the markets were closed in observance of Good Friday.  The U.S. Department of Labor reported the economy added 916,000 jobs last month, sharply above consensus estimates.  The market was also supported last week by comments from Fed Chair Powell who maintained a dovish (accommodating) tone, repeating his belief a move up in inflation would be temporary (so don’t worry about interest rate hikes anytime soon).  Put it all together, and the outcome was a nice week for stocks.

For the week as whole, all three major stock indices posted solid gains – the Dow Jones Industrial Average rose 2% to a record high 33,800.60, the Standard & Poor’s 500 Index also finished the week at a record high, gaining 2.7% to 4,128.80 and the NASDAQ Composite increased 3.1% to 13,900.19

Looking to the week ahead, markets will have a lot to digest, with some key economic data due out, the release of the Beige Book, and the kickoff of earnings season.  Economic data out this week includes the March Consumer Price Index (which will be even more closely followed given the surprise increase in the PPI last month), March Retail SalesMarch Industrial Production, and March Housing Starts.  The Federal Reserve releases its Beige Book on Wednesday, which is a qualitative report on economic conditions from the 12 Fed districts that is published eight times per year.  Additionally, this week marks the “official” start of earnings season!

Banks highlight the opening week of earnings season, as JPMorgan ChaseWells FargoBank of AmericaCitigroupU.S. Bancorp, Goldman SachsMorgan Stanley, and PNC Financial Services are all scheduled to report.  Away from the financial sector, FastenalBed Bath & Beyond, Delta AirlinesUnited Health Group and PepsiCo will also be reporting.

Looking at the earnings season in aggregate: For the first quarter of 2021, the estimated earnings growth rate for the S&P 500 is 24.5%, which if that is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth rate since the third quarter of 2018 (26.1%) – according to FactSet.  Beyond the actual results being important, we’ll be watching to see to what extent companies give forward guidance and how that looks!

As always, don’t 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