U.S. markets and stock exchange traded funds were losing their grip on gains toward the end of Tuesday’s session after major indices touched record highs with a number of blue chip earnings at bat.
On Tuesday, the Invesco QQQ Trust (NASDAQ: QQQ) gained 0.2%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was flat, and iShares Core S&P 500 ETF (NYSEArca: IVV) dropped 0.1%.
Supporting markets, 3M Co said it benefited from lower costs and demand for disposable respirator masks, hand sanitizers, and safety glasses due to the resurgence in coronavirus infections while Johnson & Johnson said it expects its COVID-19 vaccine data early next week, Reuters reports.
So far, of the 84 companies that have posted quarterly earnings through Tuesday morning, 86.9% have beat analyst expectations, according to Refinitiv data.
Yet some companies did not fare so well. American Express weakened after posting a 15% drop in quarterly profit in response to pandemic-led lockdowns and business restrictions that cut into traveling and dining out.
“Even though the expectations for the earnings recovery are pretty robust, at this stage it is still going to be a situation where there is not going to be a whole lot of visibility on earnings given the depths of the pandemic and uncertainty in the path ahead,” Tom Garretson, senior portfolio strategist at RBC Wealth Management, told Reuters. “So at this stage that is probably why the market seems a bit more comfortable, because it is a little trickier than usual to put the right valuation on things.”
Major tech stocks Microsoft and Texas Instruments will release results after markets close. Additionally, Apple, Tesla, and Facebook will broadcast results Wednesday.
Investors will be looking for earnings beats that can continue to top analysts’ expectations and lift markets higher.
“What’s working in the market’s favor is the overall trend of economic growth is still robust and that’s likely to translate to positive earnings,” Shoqat Bunglawala, head of multiasset solutions, international, at Goldman Sachs Asset Management, told the Wall Street Journal. “There’s an expectation that there’s going to be more robust growth driven by pent up demand in the second half of the year.”
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