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Morning Notes — Melt Up

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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