Medicare Agent News: Earnings Are Saving Stocks

Monday, August 2, 2021

Earnings Are Saving Stocks

By Alex Eule | Monday, August 2

Dog Days. August is generally a tough month for the market. Sure enough, stocks struggled to gain ground on the first day of summer's last full month. The S&P 500 fell nearly 0.2%, while the Dow Jones Industrial Average was off 97 points, or 0.3%. The Nasdaq Composite managed to close higher, though it was up less than 0.1%.

There are lots of factors we could blame for stocks' slow day. After a wave of tech earnings last week, investors are waiting for the next round of results to kick in. Starting tomorrow, some 131 companies in the S&P 500 are scheduled to report their earnings in a 72-hour period.

Thus far, earnings have helped investors overlook other troubling trends, including accelerating Covid-19 cases and a few less-than-ideal economic reports. After a flurry of quarterly reports last week, second-quarter earnings for S&P 500 companies are now likely to be up an aggregate 89% from a year ago, according to Refinitiv, way higher than an already bullish outlook just a month ago, when strategists expected second-quarter earrings growth of 65%.

Here's how Ryan Detrick, chief market strategist for LPL Financial, sums up earnings season, so far:

Growing earnings from the depressed year-ago quarter while much of the economy was shut down is not very impressive on its own. But blowing away analysts’ estimates after they’ve been consistently raised since last fall is very impressive, especially when considering ongoing challenges around Covid-19, supply chain bottlenecks, labor and materials shortages, and input cost pressures.

Sure enough, stocks continue to hold up even as the pandemic news worsens. On Monday, more local governments throughout the U.S. were once again talking about mask mandates, as the daily Covid infection rate reached 100,000 for the first time since February.

For stocks, it hasn’t mattered. The major indexes are still within 1% of their all-time highs.