Actions the following week: corporate earnings don’t look great. But the drought could end soon

Actions the following week: corporate earnings don’t look great. But the drought could end soon

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Large banks JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (Ç) reported results on Friday that showed there are still concerns about the impact of the pandemic on consumer and small business behavior. Delta (DAL) also reported a record loss last week with the coronavirus shutdown.

According to FactSet Research estimates, S&P 500 companies are expected to report that their profits have fallen by around 7% in the last three months of 2020 compared to the fourth quarter of the previous year. This, however, should be the end of the yield drought.

Senior FactSet earnings analyst John Butters told CNN Business that S&P 500 earnings are expected to rebound in the first quarter, with analysts predicting a jump of nearly 17% year-over-year in the first quarter and an increase of more than 46 % in the second quarter. For the full year, Butters said that profits are expected to increase by more than 22%.

Obviously, companies will face relatively easy comparisons with last spring, considering that much of the United States economy has practically closed for several months, starting in March. This is one of the reasons why stocks have returned to almost record levels.

But the discharge can be justified, especially if vaccinations and stimuli lead to a faster return to normal.

Lindsey Bell, chief investment strategist at Ally Invest, said in a report that “concerns about valuations can be overstated.”

“There is also a good chance that Wall Street is underestimating profit growth in 2021. Profit estimates for this year continue to rise,” she added.

Many companies tightened their belts during the pandemic, cutting costs to preserve profit margins. This means that any incremental sales growth will have a much greater impact on future earnings.

“The very strong margin performance during the pandemic bodes well for profit growth over the next two years as revenue growth resumes,” said David Lefkowitz and Matthew Tormey, stock strategists at UBS Global Wealth Management, in a report.

With that in mind, investors will keep an eye on the big companies’ projections when they release the results next week. (US markets are closed on Monday in celebration of Martin Luther King Jr. Day)

Several other large banks, mainly Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (in), are scheduled to report. Also available? Earnings from Netflix (NFLX), UnitedHealth (UNH), Procter & Gamble (PG) and United airlines (UAL).

Two tech giants Dow, who have recently made major personnel changes, are also expected to disclose their latest gains.

IBM (IBM), who recently hired former Trump economic adviser and former Goldman Sachs chief operating officer Gary Cohn as its vice president, reports that the company is about to spin off a large portion of its older businesses to focus on its operations. a cloud.
And chip company struggling Intel (INTC), who announced that CEO Bob Swan would step down after just two years at the helm, will likely speak more in his release about how he can get back on track.

Alibaba is facing an ‘existential crisis’

This year may be the most important for Alibaba (NANNY) since it was founded two decades ago, reports my CNN business colleague, Jill Disis.

China’s most famous technology company faces a series of internal and external challenges that are in danger of changing it forever. Chinese officials are investigating the company for antitrust reasons, while pressing its large financial affiliate, Ant Group, to reshape its business.

To make matters worse, the company’s leading figure – co-founder and former president and CEO Jack Ma – has been out of public view for months.

The other threat is Washington. While the Trump administration supported the proposal to ban US investment in Alibaba and two other prominent Chinese technology firms, U.S.-China tensions are unlikely to go away anytime soon.

All of this could lead to a very difficult 2021 for Alibaba.

“Alibaba, like all other great Chinese technologies, is in [an] existential crisis, “said Alex Capri, a researcher at the Hinrich Foundation and a senior visitor at the National University of Singapore.

Next

Monday: US markets close

Tuesday: Bank of America, Goldman Sachs, State Street and Netflix won

Wednesday: BNY Mellon, Morgan Stanley, Procter & Gamble, earnings from UnitedHealth and Alcoa; EIA report on crude oil stocks

Thursday: earnings from Baker Hughes, Truist, Union Pacific, IBM and Intel; ECB decision; Initial claims for unemployment in the USA

Friday: Profits from Ally Financial and Schlumberger; Sales of existing homes in the USA

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