First-quarter earnings season is just getting started. So far, 9% of S&P 500 companies have reported results. Of those reporting, 81% are beating analysts’ estimates (36 out of 45). All major stock indices posted gains of over 1% as investors took to heart the strength of the U.S. economy.
Among noted events last week, the Dow Jones Industrial Average passed 34,000 for the first time. This compliments both the S&P 500 and the Nasdaq hitting new highs this year. The S&P 500 is currently at 4185. In Barron’s this weekend, one analyst stated he believes that index could hit 4500 later this year.
The chart below from FactSet shows earnings growth estimates by sector. The bar on the far left shows the financial sector is expected to see the largest earnings growth. Not surprisingly, it was announced last week that Wall Street’s largest banks produced record quarterly profits.
I’ll continue to keep you updated on how first-quarter earnings are reported. If you have any questions, please contact me.
The Markets and Economy
- Speaking to 60 Minutes during an interview on April 11th, Fed Chairman, Jerome Powell said about the U.S. economy; “We feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming much more quickly.” He went on to say, the Fed’s forecast is that the economy could produce close to one million jobs a month for a “string of months.”
- Another positive for the economic outlook is the surging price of raw materials. The cost for materials will affect companies from home builders to clothing makers. And, if history repeats itself, it will result in a boon to the corporate bottom line. According to analysts, rising material costs usually foreshadows increased profit margins for U.S. corporations.
- The Egyptian government is asking the Japanese owner of the ship that became “stuck” in the Suez canal a couple of weeks ago for about $1 million. The money is to pay for the cost of the rescue operation and to repair damage to the banks of the canal and for lost revenue. The situation compounded already challenging conditions for the shipping industry. A shortage of parts and goods due to the pandemic has seen the shipping industry playing catch-up with demand.
- Consumer prices spiked last month as the economic recovery gains momentum. The Consumer Price Index rose 2.6% for the 12-month period ending March 31. Gasoline saw the biggest price jump.
- Bernie Madoff, whose name became synonymous with financial fraud, died in prison last week. The former chairman of the Nasdaq in the 1990’s died at age 82 from kidney failure due to a terminal condition. He was serving a 150-year sentence for his $20 billion Ponzi scheme.
- Retail sales jumped a whopping 9.8% in March from a month earlier according to the Commerce Department. The gain in consumer spending–the biggest driver of economic activity–came as the government began distributing hundreds of billions of dollars of stimulus funds to U.S. households.
- The U.S. housing market is almost 4 million single-family homes short of what is needed to meet the country’s demand according to Freddie Mac. This represents a 52% rise in the nation’s home shortage when compared with 2018. The lack of available homes on the market will be an obstacle to U.S. economic growth officials said.
- The Port of Los Angeles and the Port of Long Beach, located just three miles apart on the west coast are the two busiest American ports when measured by total container trade. They are just beginning to catch up from the logjam created by the “stuck” mega-ship in the Suez Canal last month.
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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Securities offered through Triad Advisors, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.
