Traders work on the floor of the New York Stock Exchange (NYSE), September 21, 2021.
Brendon McDermide | Reuters
Stocks seem to have broken the often frightening trading pattern of October for now and whether it will continue will depend on earnings in the week ahead.
Dozens of companies are reporting, from Netflix and Tesla to Intel, Procter & Gamble and American Express. Railroads, airlines, healthcare, technology, financial institutions, energy and consumer goods companies are reporting in the first big wave of reports.
The stock was higher last week, with small cap Russell 2000 leading the charge with a gain of over 2.1% until Friday afternoon. Cyclical sectors such as materials, industry and consumer considerations were the most advanced, and technology was its own with a 2.3% profit. The best sector was the Real Estate Investment Trust, which jumped more than 3.7%.
Paul Hickey, co-founder of Bespoke, said, “Unlike the recent earnings season, which we’ve seen recently, expectations sound a bit more nuted this earnings season.” This lowers the bar, making the earnings season much more manageable. Instability A code word for ‘down’ can be managed A code word for ‘up’. It’s a decent set-up and just the fact that the market has come down to the season of earnings. “
Hickey said it’s not clear that the strong geopolitics of the stock over the past few sessions is all but clear for the generally negative tone of October.
“We will have a better idea after receiving all these earnings reports next week,” he said. “That’s going to be a big deal. So far the initial reactions haven’t been too bad, especially since people are dizzy because of all the worries. Reasonably well-held.”
Hickey noted that the company has recovered much of the amount that fell after discussing supply issues in its financial first-quarter report on Sept. 23.
Major banks such as Citigroup, Goldman Sachs and Bank of America reported quarterly results last week with hard bits. According to Refinitive’s I / B / E / S data, the financial sector, which includes insurance and credit card companies in addition to banks, is expecting a 30.7% profit at this time. Overall, the S&P 500 is expected to gain 32% based on the company’s profit estimates and actual third-quarter report.
Refinitive says companies have so far lost expectations by 15.6%, compared to the long-term average of 4%, but below the 18.4% average of the last four quarters. Energy is expected to make the most profit, a staggering 1,517%, while the lowest profit forecast for the utility sector is just 0.2%.
“Some small groups are turning off the lights, but it’s not the same thing as it was,” said Jonathan Golub, chief US equity strategist at Credit Suisse. “Roughly speaking, cyclical groups will grow by 96% in this quarter and technology is expected to grow by about 25% … as long as you have disruptions. As long as disruptions continue, it will benefit some companies. It may be temporary, but it is a temporary one. Or two years. “
Golob said it could be risky for the market if some groups are gainers. “If we can get a cumulative beat of 8% to 10%, but it’s being held by a small segment of the market, and the medium company isn’t providing strong earnings numbers, that’s a negative.” “It’s one of my concerns about the earning season.”
Golub said investors are concerned about margins shrinking due to higher input costs, but he said a major concern is that companies are unable to deliver because they do not have the product.
“They’ve got an order. They can’t fulfill it, and they can’t book sales. That’s the risk here. I think it’s real. Inventories are being adjusted further down, and backlogs are being adjusted more. Delivery time is more and More is being raised, ”Golab said. “That’s the risk.”
Golob expects the S&P 500 to rise from its current 4,470 level to 4,600 by 2021, and he said he sees nothing to lose this expectation. He hopes that cyclists will do better, but technology stocks can only be market performers.
“[Tech’s] Growth based on 12-month progress is not impressive, and it’s incredibly costly, “he said.” I think the growth of tech stocks in general and stocks in particular will face stiff headwinds from a combination of valuations. Expected sales growth is weaker than other segments of the market. If it was just the current margin, it would be a thing but it is not. It’s the next 12 months. “
“If interest rates and everything are connected to technology, that’s great,” he said. But he said he would not see Tech as a leader next year. “I think they will be market performers, but I think they will be 100% winners in the next decade.”
The 10-year Treasury yield, which particularly affects technology and growth shares, was 1.57% on Friday after peaking at 1.60% last week.
In addition to earnings, there are some additional economic reports, including existing home sales and the Philadelphia Fed Production Survey on Thursday. On Friday, market production and services PMI data were released. The Federal Reserve’s Economics Base Book was released Wednesday afternoon.
The first Bitcoin Futures Exchange-traded fund could start trading next week, while ProShares is expected to debut the Bitcoin Strategy ETF. The Securities and Exchange Commission objected to filing before midnight on Monday but could hold the ETF, but it is unlikely to be seen, a source told CNBC.
Bitcoin rose above $ 60,000 for the first time in six months on Friday, as investors bet that ProShares and other cryptocurrency-based ETFs will start trading soon.
Next week’s calendar
Earnings: Albertsons, State Street, Zions Bancorp, FNB, Steel Dynamics
Morning: 30.: A survey of 300 business leaders
9:15 am Industrial production
10:00 a.m. NAHB survey
4:00 pm TIC data
Earnings: Netflix, Johnson & Johnson, Procter & Gamble, Travelers, United Airlines, Synchronous Financial, Hollyburton, Manpower Group, Kansas City Southern, Bank of NY Mellon, Fifth Third, Intuitive Surgical
Housing starts at half past one in the morning
11:00 a.m. San Francisco Fed President Mary Daly
1:00 pm Atlanta Fed President Rafael Bostick
2:00 pm Atlanta Fed Bostic
Earnings: Tesla, Verizon, IBM, LAM Research, CSX, Baker Hughes, Abbott Labs, Nasdaq, Biogen, Knight-Swift Transportation, Canadian Pacific Railway, Northern Trust, Tenet Healthcare, PPG Industries,
12:00 pm Atlanta Fed Bostic
12:00 pm Chicago Fed President Charles Evans
1:45 pm St. Louis Fed President James Bullard
2:00 pm Base book
8:35 pm San Francisco Feds Daily
Earnings: AT&T, Intel, Blackstone, Union Pacific, Chipotle Mexican Grill, Snap, Whirlpool, Celanese, Southwest Airlines, AutoNation, American Airlines, KeyCorp, Crocs, Marsh and McLennan, Ally Financial, Freeport-McMoRan, Nucor, Quest Diagnostics, Mattel, Genuine Parts, Alaska Air, Tractor Supply
Initial unemployment demand at 8.30 am
Morning: 30.: 300 Philadelphia Fed production
10:00 am Current sale
Earnings: Honeywell, American Express, Schlumberger, Region Financial, Roper, VF Corporation, HCA Holdings, Seagate Technology
9:45 am PMI production
9:45 am PMI service
10:00 a.m. San Francisco Fed Daily