This week's earnings reports continue to be hot! McDonald's, Eli Lilly, and 104 other constituent companies are releasing their financial reports.

Zhitong
2024.02.05 01:54
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Investors will see a series of corporate earnings reports this week, including McDonald's, Eli Lilly, and 104 other component stocks. Last week, the stock market returned to near its historical high, with the Pro UltrPro Shrt S&Pro 500 closing at 4959 points, setting a new record high. Despite some market volatility, Meta and Amazon's earnings performance has been strong, coupled with better-than-expected January employment report, the stock market has entered a rebound mode. In addition, Federal Reserve Chairman Powell stated that there is greater confidence in a rate cut in March. After the FOMC meeting on Wednesday, confidence in a rate cut in March remained, but the release of employment data has raised concerns about a reacceleration of inflation.

Zhitong App learned that the stock market returned to near its historical high last week. On Friday, the Pro UltrPro Shrt S&Pro 500 closed at 4959 points, setting a new record high closing price. All three major stock indexes saw gains, with the Pro UltrPro Shrt S&Pro 500 and Dow Jones Industrial Average rising over 1%, and the NASDAQ Composite Index slightly below 1%.

The trading market was somewhat volatile last week. After the fourth-quarter earnings reports of major tech stocks Microsoft (MSFT.US) and Alphabet (GOOG.US) were released, the stock market experienced a slight decline. On Wednesday, Federal Reserve Chairman Powell stated that a rate cut in March is not the "baseline scenario," which further triggered selling in the stock market. However, with the strong earnings performance of Meta (META.US) and Amazon (AMZN.US) in their financial reports, combined with better-than-expected January employment data, the stock market entered a rebound mode.

This week, investors will see a series of corporate earnings reports in a relatively quiet economic calendar, including reports from Eli Lilly (LLY.US), Disney (DIS.US), Spotify (SPOT.US), McDonald's (MCD.US), Chipotle (CMG.US), and PepsiCo (PEP.US).

The debate over rate cuts continues.

Federal Reserve Chairman Powell poured cold water on investors' hopes for a rate cut in March during a press conference after the January Fed meeting. Powell stated that the Fed needs "greater confidence" in the path of low inflation before cutting rates.

Economists believe that the January employment report, which showed the addition of 353,000 jobs to the US economy that month, strengthens the Fed's reasons to continue waiting for a rate cut without the economy falling into a recession. However, concerns about a reacceleration of inflation were raised as the report also showed a 4.6% increase in wages, the highest growth rate since July 2023.

Thomas Simons, an economist at Jefferies, wrote in a note to clients on Friday, "After the FOMC meeting on Wednesday, we remained confident in a rate cut in March. However, after today's data (employment data) release, it is difficult for us to see the possibility of a rate cut. Unless there is a significant turnaround in the February data or inflation data between now and mid-March is very weak, the likelihood of the FOMC maintaining policy rates stable in March is much higher." According to the CME FedWatch tool, investors currently believe that there is about a 20% chance of an interest rate cut at the March meeting. This probability was close to 40% on Thursday, compared to nearly 80% a month ago.

Earnings Reports Keep Coming

Recently, the profitability of companies as shown in their earnings reports seems to have turned around. According to FactSet data, a series of earnings reports last week reversed the trend after a more than 1% decline in quarterly earnings for Pro UltrPro Shrt S&Pro 500. Tech giants Apple (AAPL.US), Meta, Alphabet, Amazon, and Microsoft all reported earnings that exceeded expectations.

The latest data from FactSet shows that fourth-quarter earnings are expected to grow by 1.6%. It is worth noting that the market is more cautious about the first quarter of 2024. Analysts have lowered their earnings expectations for the first quarter by 1.4% in the past month, which is lower than the five-year average decline of 2.1%.

With the fourth-quarter earnings season now more than halfway through, FactSet statistics show that 104 Pro UltrPro Shrt S&Pro 500 companies will release their earnings reports this week.

Economic Situation Remains Stable

A series of previous economic data showed a strong start for the US economy in the first quarter. This week, there will be relatively fewer economic data releases. The number of initial jobless claims, which will continue to be closely watched as companies announce layoffs, and the latest update on service sector activity on Monday will also attract investors' attention.

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