After ending last week roughly flat, stocks are mixed ahead of a jam-packed week of market catalysts that are sure to shed light on the economy’s ongoing recovery, with earnings from Tesla, Alphabet, Microsoft and Apple among those slated for early in the week—followed by economic reports on gross domestic product and inflation through Friday.
Shortly after the market open, the Dow Jones Industrial Average and S&P 500, which both ended last week just shy of record highs, were up about 0.2% apiece, while the tech-heavy Nasdaq, which is about 0.5% off a February high, ticked up about 0.3%.
Among stocks rising ahead of earnings, Tesla shares are up 1.2% as investors await after-market results Monday that Mott Capital founder and CEO says could yield a “monster earnings beat” thanks in part to bitcoin’s dramatic rise in the first quarter and Tesla’s growing adoption of the world’s largest cryptocurrency.
Meanwhile, shares of Apple, which reports earnings late Wednesday, are ticking up 0.3% after the iPhone-maker announced it’s investing a staggering $430 billion in the U.S. over the next five years ($80 billion more than previously planned) to create 20,000 new jobs and fund a new campus and engineering hub in North Carolina’s Research Triangle area.
According to Bank of America, this week of earnings will be the season’s busiest, with roughly 40% of companies in the S&P reporting quarterly results—including Microsoft, Starbucks and GE on Tuesday; eBay, Facebook and Spotify on Wednesday and then Amazon and Twitter Thursday.
Surging corporate earnings—along with massive fiscal stimulus and accommodative monetary policy—have helped lift the market to new highs during the pandemic, but better-than-anticipated earnings results aren’t typically leading to stock gains anymore. “Investors were unenthused by big [earnings] beats last quarter,” Bank of America strategist Savita Subramanian said in a recent note. In fact, she says companies that beat on both earnings and sales underperformed the S&P by about 0.1% the day after reporting—representing the worst underperformance after earnings in history. “The only time since 2000 that we saw negative alpha was in the second quarter of 2000—right at the peak of the tech bubble,” Subramanian adds.
WHAT TO WATCH FOR
In addition to earnings, this week should provide clarity on both monetary and fiscal policy, with the Federal Reserve making one of its eight annual announcements on Wednesday, the same day President Joe Biden makes his first joint address to Congress. He’s sure to make the case for his $2 trillion infrastructure proposal, which is already facing oppositionfrom key lawmakers, and he’s likely to preview additional details on his tax plan, which briefly tanked markets last week.
It’s also a big week for economic data. The Bureau of Economic Analysis will release first-quarter GDP figures on Thursday. Economists expect growth will come in at around 6.9%, which could undercut the White House’s argument that trillions of additional dollars in fiscal spending are necessary, says Vital Knowledge Media Founder Adam Crisafulli. On Friday, first-quarter inflation readings will be released, and economists are expecting a big jump in manufacturing prices. “The big debate, however, concerns the fourth quarter and beyond—and the extent to which inflation gains now prove durable and accelerate further into 2022,” says Crisafulli. “The answer to that won’t be known for several more months.”