Markets “In a Nutshell” for July 21, 2020
Investment Week at a Glance
Stocks finished up for the week. The Dow Jones Industrial Average was up 2.29%, the S&P 500 rose 1.25%, the New York Stock Exchange Composite (2,000 stocks) rose 2.71% and the average investors index (Value Line Index) was up 3.84%. Foreign stocks (DJ Global ex U.S.) were up 1.15%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 1 basis points lower at 0.64%. (Data source: Wall Street Journal)
Tech Negative for the Week
While the U.S. market as a whole ended the week positive on multiple indices, the worst sector for the week came from the most unlikely of them all; Technology. Ending the week with a negative return of -1.82%, technology stocks started the week on its typical high note, up over 2%, before it took a big reversal and slowed to a halt the momentum of the sector that has essentially carried the U.S. stock market to its levels today. Even after the down week, the tech-heavy Nasdaq Index is up over 17% this year, while the S&P 500 is nearly flat, and has shown no signs of stopping since its March lows until now. This sign of weakness could be the bad news many skeptical investors have been expecting as markets have risen at a fast and furious pace, especially as earnings season is upon us. With the first update on every companies’ financial health and outlook since the deep uncertainty following the end of the 1st Quarter, any downward trending outlook could cause the market to reevaluate the current price of stocks. (Barron’s)
Earnings Season Begins
In one of the most uncertain earnings seasons in recent history, investors are bracing for the largest drops in earnings since the financial crisis in 2008. Other than that near certainty of a prediction, investors have very low levels of conviction in what else companies will say about their businesses. As some states have begun rolling back their reopening plans, it’s likely most of the headlines that come out of the reports will lack much detail and continue the vague theme from the 1st Quarter. Until the health crisis can be substantially resolved, it is unlikely any meaningful guidance from companies will be given, which will likely continue the high levels of volatility in the market. (Barron’s)
With company earnings for the S&P 500 set to have their biggest drop since the financial crisis in 2008, what are the consensus estimates for the drop?
Have a Great Week!
3. Earnings for S&P 500 companies are estimated to drop 44% for the 2nd (Barron’s).