Dow Jones, Nasdaq, S&P 500 weekly preview: Earnings season continues

The (SPX) continued its march towards 5000 after adding 1.4% last week. The Index (IXIC) rose 1.1% on the back of the robust earnings report from Meta Platforms (NASDAQ:) and Amazon (NASDAQ:).

(DJI) jumped as much as 1.4% to record the first ever weekly close above 38500.

“A relatively light calendar of economic data and earnings results this week will likely focus investors on earnings reports, company guidance, and comments from Fed officials in events around the country this week,” Oppenheimer’s Chief Investment Strategist said in a note.

The January jobs reports came in very strong, with both headline and private outperforming consensus expectations.

“On balance, the details of the report were largely positive and point towards continued momentum in the labor market and increased likelihood of a soft landing,” analysts said.

“Even the breadth of job gains, which we have highlighted as being relatively narrow in 2023, expanded out beyond just private education and health services and leisure and hospitality, with every major industry contributing positive job gains except mining and logging. In fact, the one-month, three-month, and six-month diffusion indices all ticked up.”

Economic calendar for this week

This week’s economic calendar is quite light while the earnings season continues. On Monday, big reporters included McDonald’s (NYSE:), Caterpillar (NYSE:), Estee Lauder (NYSE:), and Palantir (NYSE:).

On Tuesday, Eli Lilly (NYSE:), Toyota Motor (NYSE:), Amgen (NASDAQ:), Ford Motor (NYSE:), and Chipotle Mexican Grill (NYSE:). Key reporters on Wednesday are Alibaba (NYSE:), The Walt Disney (NYSE:), Uber (NYSE:), CVS Health (NYSE:), and PayPal (NASDAQ:).

On Thursday, we will hear from Philip Morris (NYSE:), Unilever (UL), while Pepsico (NASDAQ:) reports on Friday.

Overall, more than 230 S&P 500 companies have reported so far.

“EPS have beat by 6ppt so far, sales by a slimmer 0.7%,” analysts said in a note.

“Consensus 4Q EPS (actuals + ests) is tracking a 3% beat, in line with our forecast. 70%/65%/48% beat on EPS/sales/both, better than the historical average of 63%/59%/44%. Reactions to beats (+140bps) have been in line, and misses have been punished (-430bps vs. -220bps historical avg.).”

What analysts are saying about US stocks

“A soft landing for the US economy still looks likely, in our view, with growth slowing to slightly below the long-term trend. But the recent strength of US data has highlighted the possibility of an even brighter outcome. In a “Goldilocks” scenario, US growth would be stronger than expected, inflation would continue to slow smoothly, and the Fed would feel able to cut rates more aggressively through 2024—with perhaps six 25-basis-point cuts.”

“Fundamental stock selection should outperform passive index investing. The market is rife with inefficiencies… Valuation dispersion is high, public equity cheaper than private, fewer eyeballs on stocks. Single stock flows are shifting.”

“We continue to favor TECH+, Industrials/Discretionary over Energy/Materials within Cyclicals, and Health Care within Defensives.”

“Our expectations remain for the Fed to remain watchful for data that could justify a rate cut when it can feel the time is right. We expect it will most likely do such in the second half of the year (and perhaps as late as the fourth quarter) and at that with just two cuts. We remain positive on equities and continue to find fixed income as a complimentary asset class for diversification purposes.”

“As the Dot Com boom showed, continued outperformance requires stocks to exceed the high bar set by consensus. Although growth expectations are high, if estimates are realized and valuation remains unchanged, the [Magnificent 7] group will outperform.”