Stocks Are Up 8% Since Earnings Season Started, With More Gains in Store
The broad U.S. stock market eked out a gain this past week, propelled by strong retail earnings and more outperformance by tech shares. Inflation looms, but has shown little sign of hurting results so far, and investors keep reaping the rewards.
That said, the major indexes were mixed on the week. The S&P 500 rose 0.3%. The Dow Jones Industrial Average fell 1.4%, as Boeing
(ticker: BA) and Goldman Sachs Group (GS) had a particularly rough time. Because the index is price-weighted, Goldman and Boeing, which dropped 5.8% on the week on delayed 787 deliveries, can make the index swing much more than lower-priced stocks like Intel
(INTC).
The Nasdaq Composite rose 1.2%, hitting a record on Friday as tech stocks continued to rise. Nvidia
(NVDA) was a top performer, adding 7.9% for the week.
The gains are coming despite, or perhaps because of, a lack of enthusiasm in either direction from investors. “The S&P 500 hasn’t moved 1% or more in 25 trading days, the longest streak in two years,” writes Ally Invest senior investment strategist Callie Cox. “It’s risen 6% over that same period in a classic example of a slow grind higher.”
Government data and earnings reports over the past few days offered investors a temperature check of U.S. consumers as prices started to rise. The diagnosis came back healthy—retail sales rose 1.7% in October, more than expected, and earnings from several chains showed that shoppers aren’t retreating. Results from Home Depot (HD) and Lowe’s
(LOW) suggested that consumers are still adding amenities to their homes. Macy’s
(M) wowed Wall Street with a possible plan to separate its digital business from its bricks-and-mortar stores; its shares jumped more than 21% on Thursday. Results from Kohl’s
(KSS) and Walmart (WMT) were impressive too.
In fact, earnings have been remarkably impressive, even as investors fret that companies won’t be able to handle supply-chain slowdowns. The S&P 500 is up 8% during this earnings season, its best performance in seven years, according to Cox. “Profit margins for S&P 500 companies have barely flinched, showing that companies are weathering inflation headwinds well,” she wrote.
One of the few assets that hasn’t performed well lately is oil, which fell 5.8% on the week and 10% from its late-October highs. Supply is coming back as some U.S. producers ramp up, and demand is slackening because of a spike in Covid cases in Europe, leading to lockdowns there.
This coming week, investors will be watching to see if President Joe Biden nominates a new Federal Reserve chair, or sticks with the current one, Jerome Powell.
Write to Avi Salzman at [email protected]