Stocks rallied Monday to extend last week’s gains and continue the major indices' run of record highs. The S&P 500 underperformed other major indices, gaining 0.44%, while the Nasdaq rose 0.59%, the Dow added0.52%. Meanwhile, the Russell 2000 soared 1.94% and Bitcoin and Dogecoin skyrocketed 11.5% and 14.2% respectively.
Helping to get things moving in the right direction, Treasury Secretary Janet Yellen’s said the U.S. could return to full employment by 2022 if lawmakers can pass large enough stimulus. This coupled with slowing Covid case rates inspired investors who flocked to bets on a reopening economy, including small-cap stocks, airlines, and other stocks which have endured the brunt of the pandemic.
Investors also flocked to Bitcoin and other cryptos today after Tesla (TSLA) made a $1.5 billion investment in Bitcoin, with hopes to begin accepting payments in the cryptocurrency soon. Meanwhile, Gamestop (GME) and AMC (AMC) continued their descent as interest in meme stocks has all but disappeared.
Looking forward to the rest of the week, investors will likely be paying attention to many of the same drivers that helped last week's rally. Earnings from large companies including ride-sharing companies Lyft (LYFT) and Uber (UBER), as well as Disney (DIS). In addition to earnings, investors will also be watching Washington for news on the fate the stimulus bill as several economists have weighed in expressing concerns that the current bill may be too large. Lastly, after last week’s worse-than-expected jobs report, investors will be paying attention to unemployment claims data Thursday as they keep an eye on a wobbling recovery.
Earnings
As of Friday, just under 60% of the S&P 500 has reported earnings. The reports have been surprisingly good so far, with Fact Set reporting that 81% of companies have beaten estimates. This would tie the fourth quarter for the second-highest earnings beat-rate since FactSet began tracking this in 2008.
While this is impressive, it should be taken into consideration that we are in an unprecedented pandemic and part of this high beat rate could be due to a poorer than normal understanding by analysts of the distribution of struggles within the market. This can be highlighted by the fact that companies are also beating EPS estimates by 15.2% more than the five-year average, which is just 6.3%. While this larger than normal discrepancy may point to a better-than-expected year during normal times, it may just underscore how hard modeling the pandemic economy is in this case.
With that in mind, Disney, Uber, and Lyft all report earnings this week. Unlike last week, this week’s reports will likely be a little more indicative of how recovery stocks handled the fourth quarter. Lyft and Uber report after market closes on Tuesday and Wednesday respectively, while Disney reports after close on Thursday.
Uber and Lyft have both faced steep declines in revenue throughout the pandemic as consumers have been generally wary of travel. During the third quarter, Lyft's revenue fell 48% year-over-year and Uber’s fell 20%. For this quarter, investors are hoping Lyft can beat the consensus estimate for a loss of $0.68 per share, while Uber will be looking to beat the projections for a loss of $0.39 per share.
Meanwhile, the highlight for Disney’s report will be growth of the Disney+ streaming platform. Total subscribers for the service were 86.8 million in December, after having only been in operation for a little over a year. Despite the fast growth of Disney+, Disney's theme parks, though mostly open now, are operating at a limited capacity. Investors in Disney will be looking for the company to beat consensus estimates for a loss of $0.38 per share.
Economic Events this Week
Tuesday
- 6:00 a.m. - NFIB Small Business Optimism
Wednesday
- 8:30 a.m.- CPI
- 10:30 a.m. - EIA Crude Oil Inventories
Thursday
- 8:30 a.m. - Initial Claims
Friday
- 10:00 a.m. - Univ. of Michigan Consumer Sentiment - Prelim
Earnings Reports this Week
Tuesday:
Before the bell: CNC,DD,CARR,WCC,CVE
After the bell: CSCO,PAA,THC,FISV,CCK,TWTR,FMC,WELL,LYFT
Wednesday:
Before the bell: GM,BG,KO,PAG,CDW,TEVA
After the bell: MOH,LUMN,XPO,UBER,PPC,DCP
Thursday:
Before the bell: PEP,MT,BAM,TSN,AZN,KHC,DUK,TU,LH
After the bell: DIS,DVA,MHK,CC,EXPE,NSP,DLR,FLO,GDDY
Friday:
Before the bell: ENB,D,NWL,FTS,HUN,AXL
Sector and Industry Sentiment
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