Top Story
Blowout earnings
- With nearly 90% of S&P 500 companies having reported, first quarter earnings are tracking to a remarkable 49% year-over-year increase, more than double the increase as of March 31.
- S&P 500 revenue is on track to grow 10% year over year, four percentage points above the March 31 estimate and the most upside FactSet has ever recorded.
- The consensus S&P 500 earnings estimate for the next four quarters has impressively increased by 4% since earnings season began.
- Given the favorable economic environment, we believe $187.50–$190 per share is a reasonable expectation for S&P 500 earnings in 2021, up more than $10 from our prior estimate.
Daily Insights
U.S. equities point toward a mixed open amid better than expected earnings and Friday’s lackluster employment report
- S&P 500 Index futures are slightly higher, building from last week’s positive performance.
- European stocks are mixed as the Euro Stoxx 50 is marginally lower through midday trading.
- Asian markets were slightly higher with the Japanese Nikkei one of the standouts.
Earnings strength supports more upside potential for stocks
- We are raising our 2021 year- end S&P 500 fair value target range to 4,400–4,450, up from 4,050–4,100.
- The economic backdrop remains favorable, supported by vaccine distribution, the reopening, and massive stimulus.
- The stronger earnings growth has enabled stocks to grow into their valuations.
- Risks include COVID-19 spread outside the United States, wage and input cost pressures, and higher interest rates.
- Learn more in today’s Weekly Market Commentary, available after 1p.m. ET.
More new highs
Both the S&P 500 Index and Dow closed at new all-time highs on Friday. Meanwhile, copper is making new all-time highs this morning, as well.
- The S&P 500 has 26 new highs in 2021, just beneath the 35 in 2019 and 33 in 2020.
- The Dow has 24 new all-time highs in 2021, edging above the 23 new highs from 2019.
- Copper traded in a range for nearly 13 years and appears to be breaking out of a sizable base, which could lead to much higher prices as the global economy continues to improve.
Technical update
Copper prices closed at an all-time record on Friday, and are continuing that move this morning up more than 2%. Growth stocks are under pressure this morning after Friday’s short-lived rally, and the S&P Information Technology Sector is nearing 11-month relative lows vs. the S&P 500.
Week ahead
The follow economic data is due out this week:
- Tuesday: National Federation of Independent Business (NFIB, Apr.) Small Business Index, Job Opening and Labor Turnover Survey (JOLTS, Mar.)
- Wednesday: Consumer Price Index (Apr.), hourly earnings and workweek statistics (Apr.), Treasury budget (Apr.)
- Thursday: Weekly initial and continuing claims, Producer Price Index (Apr.)
- Friday: Export and import price data (Apr.), retail sales (Apr.), industrial and manufacturing production (Apr.), business inventories (Mar.) and University of Michigan sentiment (May)
Amazing Earnings Season: LPL Research Reacts
LPL Research raises its year-end S&P 500 Index fair value target range again in the wake of a stunning Q1 2021 earnings season. Learn more in today’s Weekly Market Commentary, available after 1p.m. ET.
Sell in May?
On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder punch holes in the “Sell in May” axiom and reflect on how the economic data continues to come in extremely strong as the economy opens up faster than expected.
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