Melt Up
January 20, 2021
Very early Q4 earnings metrics are coming in much stronger than expected. Overnight results from NFLX, UNH, MS, JBHT and PG beat expectations, but get a mixed investor reception.
Earnings season: The sample size is too small to cite reliable metrics, but early reports have already improved bottom-up expectations with S&P 500 Q4 earnings now expected to decline -5.9% vs. -8.8% last week and -12.7% at the beginning of the quarter. Thus far, post-earnings stock price reactions look similar to what we saw last quarter when many better-than-expected results received a lackluster/downbeat response.
Sectors: The 7-day average of new coronavirus cases is down -16% week-over-week, even as testing numbers increased. And the 2-week growth rate of national COVID-19 hospitalizations has now crossed below 0%. The improved coronavirus trends are mixing with US fiscal stimulus optimism in the near-term. But further improvement in US coronavirus trends could begin to erode fiscal stimulus optimism, which would temporarily depress bond yields and weigh on cyclical/value stock outperformance.
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