First quarter earnings season offered something for everyone. On the positive side, corporate America produced solid results outside of the COVID-19 pandemic trouble spots, which included retailers, travelrelated businesses, and banks. At the same time, 2020 earnings estimates have plunged, and a return to “normal” earnings could be two years or more away.
Stocks fell last week, and many blamed the drop on high stock valuations, Federal Reserve Chairman Jerome Powell’s gloomy outlook, and rising US-China tensions. Perhaps investors also are increasingly skeptical about prospects for a smooth V-shaped recovery. Regardless, stocks may have been due for a pullback after gains in late March through April and could potentially have further to fall.
Download the Full Article
As we discussed in earlier this week in Markets Due for a Pause, there were multiple technical reasons to believe that US equities were due for some sort a pullback following a more than 30% rally from the March 23 lows. Technical resistance near the 2935 level for the S&P 500 Index, declining participation, and seasonal headwinds all suggested a near-term downward bias.
The number of COVID-19 tests in the US has ramped up significantly, which is a major step to defeating this terrible pandemic. “We know we need more testing to help quickly isolate those infected, and last week we had more than 300,000 tests on consecutive days for the first time ever,” said LPL Financial Senior Market Strategist Ryan Detrick. “What is even better news is the percentage of positive tests has been trending lower, even as more testing has ramped up.”
Stocks have had a historic run amid increasingly negative headlines. Historically, stocks have tended to lead the economy, and while a second-half rebound may be likely, some equity weakness over the coming months is also possible. The historically worst six months of the year have officially started, and combined with technical warnings, that suggests stocks may take a well-deserved break soon.
Download the Full Article
The last week of April was a big news week. A very weak first quarter GDP highlighted a busy economic calendar. Investors digested a flurry of earnings reports, including some of the biggest names, such as Apple, Amazon, Facebook, and Microsoft. Gilead Sciences released promising test results for a COVID-19 treatment, a positive step in potentially limiting the human and economic impact of the virus as some states began to reopen their economies. Finally, we heard from three major global central banks.
Download the Full Article