Stocks high-step into earnings season

01/21/20
  • New highs every day, small-caps lead charge
  • Phase-one trade deal signed
  • This week: Airlines take earnings stage

As Q4 earnings season got underway, the S&P 500 (SPX) notched its best week of the past four months, topping itself each day and extending its streak of consecutive record highs to eight:

Chart 1: S&P 500 (SPX), 11/26/19–1/17/20. S&P 500 (SPX) price chart. A record week.

Source: Power E*TRADE


The move: +8.6%, Morgan Stanley’s (MS) Thursday–Friday post-earnings rally. Overall, banks got earnings season off to a solid start.

The number: 1,608,000, the numbers of housing starts in December—the most since 2006.

The headline: The “phase-one” trade deal is signed, sealed, and delivered. The US and China signed off on the agreement last Wednesday (the US also removed the longstanding “currency manipulator” label from China).

The fine print: But many tariffs are still in effect, and are expected to remain in place until after the November US presidential election. Possible future reductions are said to be dependent on China’s ability to abide by the terms of the phase-one deal.1

The quote: “The US consumer continues to be in a strong position.” That’s JPMorgan Chase CEO Jaime Dimon, from a statement accompanying the bank’s record-setting earnings last week.2

The scorecard: The SPX has gained ground in 13 of the past 16 weeks, but last week small caps took hold of the market reins—the Russell 2000 (RUT) is now less than 2.5% from its all-time high:

US stock index performance table for week ending 1/17/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector roundup: The strongest S&P 500 sectors last week were utilities (+3.8%), information technology (+2.9%), and materials (+2.6%). The weakest sectors were energy (-1.1%), financials (1.06%), and consumer discretionary (+1.1%).

Highlight reel: Signet Jewelers (SIG) jumped +39% to $30.12 on Thursday, while MGP Ingredients (MGPI) slid 28% to $38.18 on Friday.

Futures action: After falling as low as $57.42/barrel on Wednesday, March WTI crude oil (CLH0) bounced to close last week around $58.75. February gold (GCG0) steadied after a Monday–Tuesday pullback, closing Friday around $1,557/ounce. The biggest futures up moves last week were January bitcoin (BTCF0, +9.7%) and March palladium (PAH0, +9.1%). The biggest futures down moves were in February natural gas (NGG0, -9.1%) and March coffee (KCH0, -5.7%).

Coming this week

Sandwiched between banks, banks, and more banks, look for several high-profile airline, pharma, tech, and consumer staples companies to release earnings this week:

●Tuesday: United Airlines (UAL), International Business Machines (IBM), Halliburton (HAL), Capital One Financial (COF), Teledyne (TDY)

●Wednesday: Ally Financial (ALLY), Abbott Laboratories (ABT), Netflix (NFLX), Prologis (PLD), Texas Instruments (TXN), Teradyne (TER), Johnson & Johnson (JNJ)

●Thursday: AbbVie (ABBV), American Airlines (AAL), Southwest Airlines (LUV), JetBlue Airways (JBLU), Procter & Gamble (PG), Intel (INTC), Colgate-Palmolive (CL), Union Pacific (UNP), Kimberly-Clark (KMB), KeyCorp (KEY)

●Friday: American Express (AXP), Air Products and Chemicals (APD), Synchrony Financial (SYF)               

More housing numbers highlight a light economic calendar:

●Tuesday: Britain unemployment

●Wednesday: US House Price Index, Chicago Fed National Activity Index, Existing Home Sales

●Thursday: Leading Economic Indicators, European Central Bank (ECB) interest rate decision

●Friday: Markit Manufacturing PMI (flash), Markit Services PMI (flash)

Go to the E*TRADE market calendar (login required) for an up-to-date earnings schedule and a complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs and economic report times each morning.

Halfway through January. We’re a little past the midpoint of January, which is when the first month of the year has sometimes shown a tendency to give back some of its initial gains (see “New Year’s evolutions). With a 3.1% year-to-date gain as of Friday, the S&P 500 was up more than it typically is 12 trading days into a year, although not quite in the same ballpark as last year’s gangbusters return (5.2%, the fifth-strongest since 1950).

Odds and ends: Advanced Micro Devices (AMD) ended last week by following through Thursday’s intraday upside breakout of the trading range described in “Semiconductor surge.” Alphabet (GOOGL) joined the trillion-dollar club last Thursday, as its new all-time high of $1,450.70 pushed the company’s market cap to that conspicuous level only three other US companies have reached—Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT).

 

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1 Bloomberg.com. U.S. Won’t Cut More China Tariffs Until After November Vote. 1/14/20.

2 CNN.com. JPMorgan Chase CEO Jamie Dimon says US consumers remain strong. 1/14/20.

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