Stocks next week: corporate earnings don’t look great. But the drought may end soon

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Big banks JPMorgan Chase (JPM), Fargo fountains (WFC) and City Group (C) reported results on Friday that there were still concerns about the impact of the pandemic on consumer and small business behavior. Delta (FROM) It also reported a record loss last week while the coronavirus stopped on the ground.

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

John Butters, a senior FactSet earnings analyst, told CNN Business that S&P 500 profits are expected to return in the first quarter, with analysts forecasting a nearly 17% year-over-year increase in the first quarter and a 46% increase in the second trimester. For the full year, Butters said profits should increase by more than 22 percent.

Of course, companies will face relatively easy comparisons to last spring, given that much of the US economy has essentially closed for several months since March. This is one of the reasons why stocks have returned to almost record levels.

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

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

“There is also a good chance that Wall Street will underestimate earnings growth in 2021. Earnings estimates for this year continue to rise,” she added.

Many companies tightened their belts during the pandemic, reducing costs to maintain profit margins. This means that any incremental increase in sales will have a much greater impact on future revenues.

“The very strong performance of the margin during the pandemic is a good omen for earnings growth over the next few years, as revenue growth resumes,” said David Lefkowitz and Matthew Tormey, stock strategists at UBS Global Wealth Management. a report.

With this in mind, investors will follow the forecasts of large companies when they report the results next week. (US markets close on Monday, Martin Luther King Jr. Day)

Several other big banks, especially Bank of America (ferry), Goldman Sachs (GS) and Morgan Stanley (girl), are scheduled to report. Also on tap? Earnings from Netflix (NFLX), UnitedHealth (UNH), Procter & Gamble (p) and United airlines (UAL).

Two Dow tech giants that have made big staff moves lately are also ready to report their latest earnings.

IBM (IBM), who recently hired Trump’s former economic adviser and former Goldman Sachs chief operating officer Gary Cohn as its vice president, says the company will produce much of its older business to focus on its cloud operations .
And the chip company fighting Intel (INTC), who announced that CEO Bob Swan will resign after just two years in office, will likely talk more in his revenue statement about how he can get back on track.

Alibaba faces “existential crisis”

This year could be the most important for Alibaba (crone) since it was founded two decades ago, says my CNN Business colleague Jill Disis.

China’s most famous technology company faces a series of challenges at home and abroad that risk changing it fundamentally forever. Chinese authorities are investigating the company for antitrust reasons, while pushing its extended financial affiliate, Ant Group, to review its business.

To make matters worse, the company’s leader – 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 has backed a proposal to ban US investment in Alibaba and two other prominent Chinese technology firms, US-China tensions may not soon disappear.

Everything could make 2021 a very tough one for Alibaba.

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

It follows

Monday: US markets closed

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

Wednesday: BNY Mellon, Morgan Stanley, Procter & Gamble, UnitedHealth and Alcoa gains; EIA report on gross stocks

Thursday: Baker Hughes, Truist, Union Pacific, IBM and Intel gains; ECB Decision; Initial US unemployment claims

Friday: Ally Financial and Schlumberger gains; Existing home sales in the US

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