People walk past the New York Stock Exchange in Lower Manhattan on October 5, 2020 in New York City.
Angela Weiss | AFP | Getty Images
Futures contracts pegged to major US stock indices held steady at the start of the overnight session on Sunday evening as investors braced for one of the busiest weeks of the first quarter earnings season.
Contracts linked to the S&P 500 fell less than 0.1%, while contracts linked to the Dow were up 3 points. Nasdaq 100 futures lost less than 0.1%.
Investors face a busy week ahead of a Federal Reserve meeting, the debut of President Joe Biden’s American Families Plan, more inflation data and ongoing corporate earnings reports.
The week ahead is a significant week for corporate earnings, with about one-third of the S&P 500 going to update investors on how their business fared during the three months ending March 31. Some of the largest companies in the world will publish these results. week such as Apple, Microsoft, Amazon and Alphabet.
With the global economy gradually reopening, companies like Boeing, Ford and Caterpillar are expected to notice the cost pressures they face from rising material and transportation prices.
Businesses have largely managed to beat Wall Street’s forecasts in earnings season so far. With 25% of companies in the S&P 500 reporting first quarter results, 84% reported positive earnings surprise per share and 77% exceeded revenue expectations.
If 84% is the final percentage, this equates to the highest percentage of the S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008.
Nevertheless, the strong first quarter results were achieved with a predominantly lukewarm reception from investors. Streets say the already high valuations and near record high levels on the S&P 500 and Dow have kept trader enthusiasm in check. But indexes are within 1% of their all-time high.
Stock markets came under pressure last week after multiple outlets reported that Biden will try to raise the capital gains tax on wealthy Americans to help pay for the second part of his Build Back Better agenda. The president is expected to elaborate on the $ 1.8 trillion plan, including spending proposals aimed at worker education and family support, at a joint session of Congress on Wednesday night.
According to Bloomberg News, the proposal would increase capital gains to 39.6% for those making $ 1 million or more, from 20% currently.
News that the White House may be considering raising the capital gains tax on the wealthy of the country pushed the S&P 500 down nearly 1% on Thursday, as multiple outlets began reporting the proposed increase.
While the broad stock index more than made up for those losses with a rebound of 1.1% on Friday, it still closed the week down 0.13% and posted a four-week earnings streak. The Dow and the Nasdaq fell 0.5% and 0.3% respectively last week.
Evercore ISI strategist Dennis DeBusschere told The Washington City Times on Sunday that fears of a spike in economic growth and negative global Covid-19 news may have ended the S&P 500’s weekly earnings streak, but that creeping pessimism shouldn’t last too long. should last.
“A rapidly improving labor market, which will continue as the US normalizes, runs counter to peak GDP fears and suggests that the output gap will close quickly, putting upward pressure on inflation, bond yields and cyclicals. asset prices, ”he wrote.
He advised investors to avoid a turn in market tones and to buy stocks that are sensitive to the health of the US economy, also known as cyclical values.
“It’s worth getting ahead of that shift in sentiment (less bad news) now and re-enabling it in Cyclicals and the disappearance of Defensives,” added DeBusschere. “If we learned anything from the data last week, it is that 1) Europe shows no signs of Europe hindering global activity and 2) pent-up consumer demand is proving resilient to negative COVID headlines.”
The Fed, meeting on Tuesdays and Wednesdays, is expected to defend its policy of heating inflation, while assuring markets that it sees the price increase as only temporary. Chairman Jerome Powell will hold a press conference Wednesday afternoon to discuss the decision of the Federal Open Market Committee.
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