If things don’t already seem crazy enough, consider this: Eleven percent of companies report today.

Everywhere you look, there are numbers, whether it’s earnings or data. We continue to get great earnings. It’s really amazing how tech has shined, with Apple (NASDAQ:) and Facebook (NASDAQ:) the latest examples. Overall, more than 80% of reporting companies have beaten Wall Street’s estimates. Amazon (NASDAQ:) steps to the plate after the close.

There are a lot of people asking if the market is overpriced, but at the end of the day, earnings drive stocks. The bar may be raised after this earnings season, which is why positive forward-looking statements are so valuable.

Today’s earnings blitz hit the pause button briefly when everyone checked their screens for the first government read on . Surprisingly, it came in a bit below the average Wall Street projection, at 6.4% vs. the expected 6.5%. That’s still a very solid number, but it does seem a bit anti-climactic after some people were talking about chances for 8%.

Initial weekly fell to 553,000 from a revised 566,000 the week before. That continues what’s now a three-week stretch below 600,000. It’s another good reading, but still way above where claims were before the pandemic. To get back to that, we’d need to see less than 300,000. Still a long way to go.

A Rare Reward For Positive Earnings As Apple, Facebook Beat

Here’s something unusual. Two “mega-cap” companies reported strong quarters late yesterday, and shares of both rose in pre-market trading. The way things have gone lately, good earnings seem to get punished more often than they’re rewarded, but so far that isn’t the case with AAPL and FB.

By now, you’ve probably seen all the numbers, so we’ll spare you the data. Let’s just say that any time a $2-trillion company like AAPl can double its quarterly profit, that’s pretty amazing. Usually the biggest companies have trouble moving the needle much and have to entice investors with stock buybacks and big dividend checks. AAPL has those, but it’s also making progress with its new products. That goes especially for 5G iPhones, whose reception has outmatched most analysts’ expectations.

Old favorites also impressed in the company’s latest quarter. Look at the Mac, a product first introduced nearly four decades ago. Sales rose 70% in AAPL’s January-to-March quarter, fuelled by the “work at home” economy. iPad sales, once almost written off by some on the Street, also engineered a 79% quarterly rise. You can say these products aren’t all that big, but that’s only if you compare them to AAPL as a whole. Most companies would love to have a product with quarterly sales of $9.1 billion (Mac) or $7.8 billion (iPad).

Of course you could buy a whole lot of Macs and iPads with the $47.9 billion that AAPL racked up in iPhone sales last quarter. That was a 65% gain, outpacing the average analyst estimate of 42%.

If you want to poke a hole in AAPL’s earnings, maybe it’s the lack of official guidance. The company stopped delivering that when COVID hit, and a lot of other companies did, too. However, many are now coming out with new projections, and those who aren’t have often been punished. Lack of guidance might have hurt shares of Tesla (NASDAQ:) after it reported a strong quarter earlier this week.

However, AAPL had a big product presentation last week which showed what they’re doing going forward. In a way, this was a chance to get their outlook in a lot of product categories, so check back on that if you’re interested in AAPL’s plans.

A lot of companies had a good runup the last quarter or two, which might have many investors reassessing and taking a breather. There’s nothing wrong with that, considering how far the market’s come and how fast. People are asking, what are realistic expectations for the continued economic reopening and how will the tug-of-war between “stay at home” and “reopening” stocks play out?

There’s also some inflation concern as companies like Procter & Gamble (NYSE:) and Coca-Cola (NYSE:) talk about raising prices. Raw materials, including agricultural commodities and lumber, have gone up a lot. Many analysts say there could be inflationary pressure later this year, and that’s not something to necessarily take off the table when you look ahead.

Facebook Ad Revenues Impress, With Amazon Up Next

FB also easily beat analysts’ revenue and earnings per share estimates. Like AAPL, it saw shares rise in the pre-market hours. Strong ad revenue carried the day for FB, which may not have come as a big surprise for investors who checked Alphabet’s (GOOGL) earnings report on Tuesday.

FB wasn’t as upbeat as some investors might have liked looking forward. It said the strong revenue growth experienced late last year might be tough to repeat, and might slow in Q3 and Q4 due to tough comparisons and new privacy rules that AAPL is imposing which allow mobile customers to opt out of letting third-party apps collect certain data. FB has been critical of this measure.

Next up is AMZN after the close today, and then we’ll be finished with the FAANGs, so to speak. COVID provided a big boost to AMZN’s revenue in 2020 as online shopping grew and businesses relied more on the cloud, and that’s expected to remain a supportive factor in the company’s Q1.

As a reminder, in the last three quarters of 2020, AMZN’s earnings exceeded analysts’ expectations by a whopping 606% (Q2), 67% (Q3), and 95% (Q4). In Q4, it delivered its largest quarter by revenue of all time, generating $125.56 billion in sales. Though Q1 didn’t have a holiday season or Amazon Prime Day, we were still in a pandemic with people continuing to show a preference for online shopping.

Looking beyond just the FAANGs, we continue to see pretty good growth in year-over-year earnings, but that’s against an easy base to beat, so to speak. What we’re hearing from some of these companies on the guidance front is that they’re actually not expecting margin growth, especially gross margin growth, to be very robust this year even though we’re expected to have a pretty strong recovery in the economy as a whole. That might be causing some concerns for investors.

One disappointment this week was EBay (EBAY), down 8% in pre-market trading after they didn’t paint a great picture and talked about competition being hard.

A Little Fed Rehash

We talked a lot yesterday afternoon about the latest Federal Open Market Committee (FOMC) meeting and Fed Chairman Jerome Powell’s press conference. If you didn’t take the day off, you actually didn’t miss a lot, because they didn’t tell us much we didn’t already know. The Fed kept rates unchanged and showed no inclination to taper its $120 billion a month bond-buying program designed to keep borrowing costs low coming out of the pandemic.

One thing Powell said in his press conference that caught some attention was that there’s “froth” in parts of the capital markets. There’s a history of markets getting hammered when a Fed chairman points this out (just Google (NASDAQ:) “Greenspan and irrational exuberance” if you need a reminder).

That wasn’t the case this time, partly because Powell has basically said the same thing before, and also because he followed up by saying the financial markets overall are in healthy shape.

Some asset prices are high, Powell said, but that has a tremendous amount to do with vaccine progress and the reopening of the economy. Leverage in the financial system isn’t a problem, he added, and the household sector is in pretty good shape. Larger banks are very well capitalized.

Also, any “froth” in the market has to be balanced against what Powell accurately described as the suffering that continues in this economy. As he noted, 8.5 million people who had jobs just before the pandemic don’t have them now. “We’re a long way” from our goal, he said.

Which explains why Powell kept beating down questions at the press conference about tapering the bond-buying program. Powell seems like a patient man, but you could sense a little bit of irritation being asked again and again about this. We’ll let him do the talking:

“When the time comes to talk about talking about (tapering), we will do that, but the time is not now,” Powell told one reporter who was about the third to ask him the same question. “One great jobs report isn’t enough. We need to see more data. It’s no more complicated than that.”

In other words, expect the easy money policy to continue for at least a while longer. They’re sticking to the script.

Crude Oil Daily Chart.
CHART OF THE DAY: CRUDE CRACKS. It was five weeks ago that a several-month rally unwound itself in one fell swoop, with futures (/CL) falling from $64.50 to $58 in one day. Since that 10% drop, the $64.50 level had been a tough level to crack through, but /CL surged overnight. Does this move pave the way for a shot at $70? Data source: CME Group. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Crude Measure: With all the talk of inflation these days—particularly in and around Fed meetings—crude oil is one of those things to keep an eye on. True, many inflation watchers tend to concentrate on the “ex-food and energy” number because those prices tend to be volatile, but crude affects the prices of so many products and processes up and down the supply chain, it’s hard to ignore. Plus, the forces of supply and demand—domestically and globally—are often manifest in the crude market before they show up in the macroeconomic data.

Data yesterday from the U.S. Energy Information Administration showed a slight rise in inventories last week—100,000 barrels—to 493.1 million barrels—less than expected but consistent with the seasonal average. Pricewise, crude futures had been inching up, but kept stalling around $64.50 (see chart above). Perhaps consistent with this morning’s rise in stocks and yields, /CL seems to have found its mojo, smashing through that $65 barrier.

Market Locomotive Seen Pulling Fed’s Train: Looking ahead, most money managers polled recently by Barron’s seem to think the has a long way to climb from here. Asked where they see it trading a year from now, more than 85% said they expect the 10-year yield to be 2% or higher by then, with close to one-third of money managers expecting 2.5% or higher. We haven’t seen a 2.5% 10-year yield since early May 2019. The same survey, by the way, showed the majority of money managers not expecting the Fed to raise rates until after mid-2022, so basically they’re forecasting the market leading the Fed on rates over the next year.

Yields initially lost ground after the Fed meeting yesterday, but upon further review apparently, yields start the morning with a rise to 1.66%, up from yesterday’s close but still about 11 basis points below last month’s intraday high of 1.77%. There’s still plenty of uncertainty in this economy, but if we continue to see economic improvement and vaccination progress, pressure on bonds might also continue.

Thank You Sir. May I Have Another? Did you say you haven’t seen enough data and earnings yet this week? OK, here’s some more. Friday brings a key measure of the Midwest economy in the form of the April Chicago Purchasing Managers Index. This business barometer rose to 66.3 in March, the highest level since July 2018. Production climbed sharply that month, and employment shifted into expansionary mode for the first time since June 2019. Analysts on Wall Street predict a slight decline in the overall PMI to 62.0 in April, according to research firm Briefing.com, but that’s still well above 50, the level that signals expansion.

One thing to consider watching in the report is prices paid. That metric has risen seven months in a row and is at a nearly three-year high. Quarterly prices rose to 76.9 in Q1. If the prices component is up again in April, it might signal more inflationary pressure, though the Fed says this could be linked to supply chain and logistical issues as the economy reopens, not necessarily anything permanent.

Disclaimer: TD Ameritrade® commentary for educational purposes only. Member SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.

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