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Weekly Updates

US Equities Gain, Busy Week for Q4 Earnings Calls

Weekly Update – January 22, 2021

  • The S&P 500 index rose 1.9% last week as the market had a positive reaction to the inauguration of US President Joe Biden and his plan to battle the COVID-19 pandemic, while stronger-than-expected quarterly earnings from companies including Intel (INTC) also boosted sentiment.
  • The market benchmark ended Friday’s session at 3,841.47, up from last Friday’s closing level of 3,768.25. The index posted a new intraday high Thursday at 3,861.45 and a fresh closing high Thursday at 3,853.07 but failed to top those levels Friday.
  • The weekly advance came as Biden released a national COVID-19 strategy on his second day in office. The plan, which calls for the authorization of the Defense Production Act to boost supplies of personal protective equipment, rapid test kits, and material for vaccines, as well as new mask mandates for travelers and a requirement that international travelers show proof of a negative COVID-19 test before departing to the US, encouraged investors in a week that has seen cumulative US COVID-19 fatalities surpass 400,000.
  • Some bellwether companies including Intel reported fourth-quarter results above expectations this week, also giving the index a boost.
  • By sector, communication services had the largest percentage increase of the week, up 5.4%, followed by a 4.3% climb in technology and a 2.6% increase in consumer discretionary. However, the financial sector fell 1.9% and energy slipped 1.6%. Other sectors in the red included materials, consumer staples, industrials and utilities.
  • The gainers in communication services included Netflix (NFLX), whose shares jumped 13.5% as the provider of streaming services reported Q4 sales and subscriber growth ahead of expectations. The company also forecast Q1 earnings per share and revenue above Street views.
  • In the technology sector, shares of semiconductor companies climbed as Intel reported Q4 adjusted EPS and revenue above analysts’ expectations and forecast Q1 results above Street views. The chipmaker also raised its quarterly dividend. Shares of Intel ended the week 1.6% lower but shares of other chipmakers rose. Nvidia (NVDA) added 6.6%.
  • In consumer discretionary, automotive industry shares got a boost as Bank of America said it expects the automotive industry to produce “solid” Q4 earnings, with many reporting improved year-over-year earnings. Shares of automakers General Motors (GM) and Ford Motor (F) climbed 10.9% and 6.6%, respectively.
  • On the downside, in the financial sector, shares of Bank of America (BAC) fell 4.4% this week as the big bank reported weaker-than-expected Q4 revenue, hurt by a drop in consumer banking revenue. The company’s earnings fell year on year but topped analysts’ expectations.
  • The energy sector’s decliners included NOV (NOV), which had a 9.1% decline in its shares this week as the oilfield equipment company warned investors it expects Q4 consolidated revenue of $1.33 billion, below prior guidance. The company’s chairman and CEO, Clay Williams, also said NOV expects continued softness in Q1, although it is hopeful for improved profitability over the course of 2021.
  • Next week’s earnings calendar includes reports from Kimberly-Clark (KMB) on Monday; 3M (MMM), Microsoft (MSFT) and Johnson & Johnson (JNJ) on Tuesday; Apple (AAPL) and Facebook (FB) on Wednesday; McDonald’s (MCD) on Thursday; and Caterpillar (CAT) on Friday, among others.
  • The data calendar next week features the January consumer-confidence index on Tuesday; durable goods and capital goods orders for December on Wednesday; weekly jobless claims and December trade data and new home sales Thursday; and December consumer spending and core inflation on Friday. There will also be a two-day Federal Open Market Committee meeting concluding next Wednesday.
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