U.S. markets and stock exchange traded funds rose Monday as the earnings season added to hopeful optimism over technology shares.
On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.5%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) fell 0.2%, and iShares Core S&P 500 ETF (NYSEArca: IVV) was 0.2% higher.
Kicking off the growth-heavy earnings week, Tesla is expected to report an increase in first-quarter revenue following record deliveries, Reuters reports.
About 40% of the S&P 500’s market cap is expected to report quarterly results from Tuesday through Thursday, including technology heavyweights like Microsoft Corp, Google parent Alphabet Inc, Apple Inc, and Facebook Inc.
“Earnings didn’t really matter over the last couple of quarters because investors were focusing on the coronavirus,” Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham, told the Wall Street Journal. “They’ll start to look under the bonnet more than they have.”
The earnings season has been an eye-opener for investors after a dismal 2020 plagued by the coronavirus pandemic. Of that 124 S&P 500 companies that have reported so far, 85.5% have outperformed analysts’ estimates, and Refinitiv IBES data now projects a 34.3% jump in profit growth for S&P 500 components.
“We’re way above the average for firms reporting earnings above estimates. More important than the fact that they are beating on estimates is that they are raising their expectations and outlooks going forward, and that’s giving the markets a nice boost,” Sal Bruno, Chief Investment Officer at IndexIQ, told Reuters.
Investors will also be waiting on a two-day Federal Reserve meeting starting Tuesday, with policymakers expected to provide insights on whether the employment landscape has affected the central bank’s plan to leave interest rates near zero for an extended period and to continue its accommodative $120 billion in bond purchases each month.
“The glaring risk is that the market loses confidence in the Fed’s handling of inflation,” Eric Mintz, co-portfolio manager at Eagle Asset Management, told the WSJ. “If the market thinks the Fed is behind the eight ball, that could derail things.”
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