THE WEEK ON WALL STREET
A fresh wave of positive corporate earnings surprises sent markets to new record
highs last week. The Dow Jones Industrial Average increased 0.40%, while the
Standard & Poor’s 500 rose 1.33%. The Nasdaq Composite index picked up 2.71%
for the week. The MSCI EAFE index, which tracks developed overseas stock
markets, was up 0.68%.
EARNINGS DRIVE MARKET
The week kicked off with the Dow Jones Industrials and S&P 500 index setting
record highs as the financial markets carried over the previous week’s price
momentum. Stocks continued to climb on a string of forecast-beating earnings
results. With about half of the S&P 500 constituent companies having reported
earnings, more than 80% of them have beaten Wall Street analysts’ consensus
estimates. Based on these results, earnings for all S&P 500 companies are expected
to come in approximately 39% above the third quarter of last year. (Forecasts are
based on assumptions, and may not materialize.) Stocks overcame disappointing
earnings from two mega-cap tech names on Friday to maintain the week’s solid
gains.
GDP GROWTH SLOWS
While businesses managed to post strong earnings in the third quarter, the first look
at economic growth came in below consensus estimates. The Gross Domestic
Product (GDP) grew at a 2.0% annualized rate in the third quarter, a slowdown from
the two previous quarters, each of which posted annualized growth rates in excess
of 6%. The spread of the Delta variant and backlogs in the supply chain were two
major factors dragging on economic activity.
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: ISM (Institute for Supply Management) Manufacturing Index.
Wednesday: ADP (Automated Data Processing) Employment Report. Factory
Orders. ISM (Institute for Supply Management) Services Index. FOMC (Federal
Open Market Committee) Announcement.
Thursday: Jobless Claims.
Friday: Employment Situation.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Simon Property Group, Inc. (SPG).
Tuesday: Pfizer, Inc. (PFE), Activision Blizzard, Inc. (ATVI), Amgen, Inc. (AMGN),
Marathon Petroleum Corporation (MPC), ConocoPhillips (COP), Prudential
Financial (PRU), Mondelez International, Inc. (MDLZ), TMobile US, Inc. (TMUS),
The Estee Lauder Companies, Inc. (EL).
Wednesday: CVS Health Corporation (CVS), Qualcomm, Inc. (QCOM), Electronic
Arts (EA), Humana, Inc. (HUM), Booking Holdings, Inc. (BKNG), Match Group,
Inc. (MTCH), Emerson Electric (EMR).
Thursday: Square, Inc. (SQ), Albemarle Corporation (ALB), Southern
Companies (SO), Cigna Corporation (CI), Skyworks Solutions, Inc. (SWKS),
Regeneron Pharmaceuticals, Inc. (REGN).
Friday: DraftKings, Inc. (DKNG).
FINAL THOUGHTS
This will be another big week for earnings, with many big names reporting. As
important as the earning announcements themselves, analysts will be just as
focused on corporate forecasts and supply chain updates. We're experiencing
another strong earnings season. According to Refinitiv, 82% of the S&P 500
companies that have reported results have beaten their EPS projections. Moreover,
profits are on pace to increase 39%. Not too shabby!
In addition to corporate earnings, the economic calendar will feature the FOMC
meeting tomorrow and Wednesday. I think we all know what to expect. To a lesser
extent, Friday's jobs report will shed more light into the real state of the economy.
It's unlikely to have any effect on the Fed's decision to taper.
Have a good week!
