The S&P 500 dipped slightly on Monday, as Wall Street prepares for the busiest week of earnings, which will include reports from some of the largest tech companies.
The broad equity benchmark slid 0.4% after trading higher earlier in the day, while the tech-heavy Nasdaq was flat after jumping more than 1% to an all-time high. The Dow Jones Industrial Average, which are less linked to technology shares, shed about 300 points.
This coming week 13 Dow components and 111 S&P 500 companies are set to report earnings. Among the quarterly reports on deck include those from Apple, Microsoft, Netflix, Tesla, McDonald’s, Honeywell, Caterpillar and Boeing.
Apple shares popped 0.8% to about $140 a share before its quarterly report Wednesday after the bell. Tesla, which also reports Wednesday, was up 1.5%
“The Street is anticipating robust results from Apple on Wednesday after the bell with Cupertino expected to handily beat Street estimates across the board,” wrote Dan Ives of Wedbush, who raised his 12-month price target on Monday to $175. “While the Street is forecasting roughly 220 million iPhone units [for 2021], we believe based on the current trajectory and in a bull case Cupertino has potential to sell north of 240 million units.”
Meanwhile, highly speculative action in stocks like GameStop were unnerving some investors, causing worry that parts of the market had detached from fundamentals and could cause the broader market to take a hit when the mania ends.
Shares of the brick-and-mortar video-game retailer soared more than 140% to top $150 at one point Monday. Some retail investors active in online chat rooms aimed to push prices higher and squeeze out short sellers.
Companies kicked off the earnings season on a strong note. Of the S&P 500 components that have already reported earnings, 73% have beaten on both sales and EPS, according to data from Bank of America. The firm said this is tracking similar to last quarter when the number of companies beating hit a record.
“You’re going to hear every day about what percent of companies beat expectations, but most companies didn’t give guidance because of Covid,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Wall Street is coming off a winning week amid the strength in the technology sector. The Dow registered its fifth positive week in six while the S&P 500 posted its third positive week in four. The Nasdaq advanced 4.19% last week for its best week since November and the fifth positive week in six as shares of Big Tech names pushed the index to a new all-time high.
The move higher came as President Joe Biden tries to push through a $1.9 trillion stimulus program that many congressional Republicans oppose. The fiscal aid includes direct checks to millions of Americans, aid to state and local governments, funding for Covid vaccines and testing, a boost to the minimum wage and enhanced unemployment benefits, among other things.
The number of coronavirus cases continues to tick up in the U.S. and abroad, but many economists are forecasting a return to growth later this year.
“We continue to expect that a reduction in virus risk due to mass vaccination coupled with fiscal support for consumer spending will lead to a mid-year consumption boom and very strong growth in 2021,” Jan Hatzius, chief economist at Goldman Sachs, said in a note to clients over the weekend. “We currently forecast GDP growth of +6.6% on a full-year basis, 2½pp above consensus,” he added.
However, the firm noted that while risks like insufficient fiscal aid look now look less likely, other risks remain. Hatzius cited consumers remaining more cautious than expected as well as the evolution of a vaccine-resistant virus strain as potential future headwinds for the market.
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