Earnings Season Starts With A Bang
So far, and it's early, corporate earnings have not disappointed in their Q1 debut. There has been a slew of positive economic data this week. The only real negative news was the setback announced earlier this week on the J&J vaccine. Here's what we're seeing so far this week.
Corporate Earnings Looking Good So Far. Of the companies that have reported this week, 83% have exceeded earnings expectations. The notables have been Goldman Sachs, which beat earnings expectations by nearly $10.00 per share. JP Morgan, which easily beat earnings expectations ($4.50/sh vs. 2.94/sh expected), has actually tracked lower this week as the bank lowered its full-year outlook for interest income. Wells Fargo posted the biggest post-earnings gain in a decade with its upbeat results. BofA and Citi also posted better-than-forecast earnings. A word of caution - don't pay too much attention over the next few months on the Year-over-Year releases of earnings and economic data. The numbers will look very rosy due to COVID anomalies. Focus, instead, on the Month-over-Month data and how well the numbers exceed market expectations. On another note, Coinbase Global (COIN) hit the markets in a direct IPO on the Nasdaq exchange this week. Coinbase serves as an exchange, if you will, for cryptocurrencies. The platform allows participants to invest, store, spend, earn, and use crypto assets. The reason this is significant is that, for the first time, the SEC will have information on a publicly traded company directly involved in crypto mining. This is, in our opinion, the first step toward cryptocurrencies becoming regulated at some point down the road. This should ultimately provide stability to a group of financial instruments rife with volatility.
Economic News To Cheer. This week has been a positive week for economic releases. Today's release of Weekly Jobless Claims shocked investors as only 579,000 claims were filed over the week versus 700,000 expected. This is the first time since the pandemic began that claims have dropped below 600,000. In addition, Retail Sales surprised by rising 9.8% month-over-month versus an expected increase of 5.9%. This is the best m-o-m improvement in Retail Sales since June of last year. Small Business Optimism improved, the Fed' Beige Book showed accelerated economic activity, and both the NY & Philly manufacturing indices far exceeded expectations. Tomorrow, we round the week out with the first reading of April Consumer Sentiment, Building Permits, & Housing Starts. The yield on the 10yr Treasury has dipped to the lowest point in nearly 3 weeks. This has provided some room for equities, especially growth stocks, to move higher. Overall, the economic picture looks solid moving forward.
Vaccination Effort in Trouble? We don't think so. First, though the administration of the J&J COVID vaccine was "paused," the number of cases (6) with a blood clotting issue are very rare. Given that more than 6.8 million doses have been administered and only 6 cases were reported to have this issue (that's 0.00009%, by the way), the pause is more than likely temporary. Second, the J&J vaccine supply was the smallest of the three on-going in the U.S., so it might slightly slow the progress, but not hamper the success of the program overall. As of Thursday, more than 125 million people have received at least 1 COVID vaccine shot and more than 78 million are now fully vaccinated. The U.S. is still averaging 3.3 million shots administered daily. Meanwhile, though Daily Deaths in the U.S. continue to drop, Daily Cases are increasing in pockets across the country. Michigan is one of those areas (see map below) that has seen the most increase in a concentrated area. An important milestone was reached this week in the vaccination efforts, as now 80% of Seniors have received at least one dose of COVID vaccine. This group has accounted for 80% of the deaths from COVID in the U.S. Overall, the vaccination effort and those who already have the antibodies via infection, we are steadily approaching herd immunity in the U.S.