After closing at record highs last week, stocks are falling for the second day in a row as corporate earnings—which lifted the market to new highs during the pandemic—start to show signs of weakness, all while speculative pockets of investor mania continue to rage on.
Shortly after the open, the Dow Jones Industrial Average fell 147 points, or 0.4%, while the S&P 500 also slipped 0.4%, and the tech-heavy Nasdaq, which underperformed Monday, shed 0.3%.
Far outperforming any other stock in the S&P, shares of railroad company Kansas City Southern are soaring 15% after Canada National proposed to acquire the company in a $33.7 billion deal—topping Canadian Pacific’s $25 billion bid from last month and setting the stage for a potential bidding war.
Heading up the S&P’s losses, Marlboro parent Altria Group’s stock is slumping 6% after reports that Joe Biden’s administration (which has not commented on the matter) is considering a reduction in the amount of nicotine allowed in tobacco products.
On the earnings front, shares of IBM are climbing 2.5% after the software giant surpassed first-quarter expectations with revenue of $5.4 billion—bolstered by ongoing growth in its enterprise cloud business—and adjusted earnings of $2.2 billion.
Meanwhile, medical device company Abbott, which makes Covid-19 test kits, reported worse-than-expected revenue of $10.5 billion Tuesday morning as Covid-related sales fell nearly 10% quarter to quarter, sending shares down about 3%.
Reflecting ongoing uncertainty over the economic recovery, epicenter stocks—or those belonging to companies hard-hit by the pandemic—are also driving losses Tuesday, with chemicals firms Dupont De Nemours, cruise-liner Carnival Corp. and Delta Air Lines all falling about 2%.
Crucial Quote
“The reopening news is directionally positive, but the big problem is that many epicenter stocks have already seen their enterprise values return to pre-Covid levels, while some are well beyond where they stood in 2019,” Vital Knowledge Media Founder Adam Crisafulli said in a Tuesday morning note.
Tangent
In a break from tradition, the Bank of Japan revealed Tuesday that it opted out of buying exchange-traded funds despite weakness in Japanese stocks. Crisafulli says the move is “perhaps the most important piece of news today” because it signals the central bank is dialing back its economic support—at a time when central banks around the world, including the Federal Reserve, have revved up their accommodative policy to help the economy and usher in new stock-market highs. Japan’s Nikkei 225, the nation’s benchmark index, fell 2% Tuesday and is now down 4.5% from a February high.
Key Background
Boosted by massive fiscal stimulus, an accelerating vaccine rollout and falling unemployment, stocks have had a strong start to the year, with the S&P pulling off 23 new all-time highs in 2021, according to LPL Financial Chief Market Strategist Ryan Detrick. “Many of our favorite sentiment gauges are becoming extremely bullish, which could be a near-term contrarian warning,” Detrick says of indicators like sentiment, at a three-year high, and low cash allocations from portfolio managers increasingly piling into stocks.
Surprising Fact
The price of dogecoin is soaring Tuesday, climbing back near record territory from last week, as retail traders around the world stage a rally around cannabis holiday 4/20. The cryptocurrency, modeled after a meme and originally developed as a joke, has climbed eight-fold over the past month, nabbing a staggering $49 billion market capitalization.
I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.
Hershey’s (NYSE:HSY) became an attractive investment last year when the COVID-driven sell-off resulted in ultra-low prices for this consumer staple. The company was not only well-positioned to weather the storm internal efforts to reposition the portfolio for longer-term sustainable growth were beginningto pay off. Over the past year, the company has finalized three major divestitures that have it in leaner shape, with a healthier balance sheet, and accelerating business.
Hershey’s, A Triple-Dip Of Good News
Hershey’s reported a very solid quarter despite headwinds related to divestitures and FX. Divestitures and FX resulted in a 0.2% and 0.4% headwind to the topline results with the takeaway being these headwinds are largely behind the company. That said, the $2.19 in reported consolidated revenue is 5.8% higher than last year and beat the consensus by 330 basis points. The gains were made on a 6.3% increase in organic sales due to a 5.75% increase in volume and a 0.6% increase in pricing. The U.S. segment was strongest with a bain of 9.06% while International saw its sales fall 13.1%.
Moving down the report, the company’s volume increase and internal efforts resulted in a significant increase in both the growth and operating margins. At the operating level, the GAAP margin increased by 470 basis points to 18.5% while the adjusted margin widened 170 basis points to 19.6% and both ahead of the consensus. The increase in revenue and margin resulted in earnings leverage and adjusted EPS of $1.49 or $0.06 better than expected.
“We delivered a strong quarter with continued share gains and volume growth to finish the year. While the impact of key external factors on our business remains uncertain, we have good momentum going into 2021 with visibility into a strong start to the year. We anticipate we will deliver another year of balanced sales and earnings growth in 2021,” said Michele Buck, The Hershey Company President, and Chief Executive Officer.
If the first dip of good news is the earnings beat, and the second the company’s increasing margins and earnings leverage, the third is the guidance. The company was among the first to reinstate guidance at the end of the calendar 3rd quarter 2020 and it has upped that guidance now. The company’s new projection has F2021 revenue growth in the range of 2-4% versus the previously expected 2.0% and a more robust 6-8% increase in EPS versus the $4.54 previously announced.
Hershey’s Dividend Is The Sprinkles On Top
If accelerating business, improving profitability, and earnings leverage aren’t enough to get you interested in Hershy there is also the dividendto consider. The company pays about 2.2% in yield with shares near $147 and there is a high expectation of future distribution increases. The company is paying about 48% of its earnings but that is based on a consensus figure well-below current guidance. The company’s earnings picture is backed up by a very healthy balance sheet as well, one that carries a moderate amount of cash and debt has good coverage and ample FCF. If the company follows true to form the next increase will come in later summer and could be worth as much as 10% of the current payout.
The Technical Outlook: Hershey’s Is Struggling With Resistance
Shares of Hershey’s popped on the news but resistance at the short-term moving average threatens to keep price action range-bound or moving lower. If price action cannot get above the 30 EMA a retest of the $144 level or lower becomes the most likely scenario. If, however, the bulls can rally and get above the EMA a move up to $152 or $153 looks probable.
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The Dow Jones Industrial Average closed at an all-time high on Wednesday and reached an intraday record on Thursday, despite pro-Trump insurrectionists violently storming the Capitol and disrupting the confirmation of President-elect Joe Biden’s victory.
The bullish mood on Wall Street has less to do with the riots and more to do with Democrats winning Georgia’s Senate runoff elections and taking control of Congress.
Stocks hinge on the prospects of corporate profit growth. The soft Democratic majority in the Senate lifts Biden’s chances of passing the fiscal stimulus that experts have urged Congress to enact for months.
A $1 trillion relief package could “easily” boost GDP expansion in 2021 by 1 point to 6%, Michelle Meyer, the head of US economics at Bank of America, said. That would all but certainly lift investors’ hopes for near-term profit growth.
While pro-Trump insurrectionists remained illegally perched on the steps of the US Capitol on Wednesday, the Dow Jones Industrial Average closed at a record high.
The market uptick has little to do with violence on Capitol Hill. Instead of fearing the chaos and President Donald Trump’s rhetoric, investors kept their sights set on Georgia’s runoff outcomes.
Raphael Warnock and Jon Ossoff’s victories in the Senate races push Democrats’ seat count in the body to 50, allowing for Vice President-elect Kamala Harris to break any ties. The soft majority paves the way for President-elect Joe Biden to pass more progressive policy, including fiscal relief meant to drive the US out of the coronavirus recession.
Stocks move – and always have moved – on the prospects of expanding corporate profits. Experts on Wall Street, at universities, and in the Federal Reserve have spent months telling Congress that sweeping fiscal stimulus is necessary to drive a faster and more equitable economic recovery. Climbing stock prices reflect investors’ beliefs that following Democrats’ wins in Georgia, such a relief package is more likely to reach Biden’s desk.
Another round of stimulus would be a game changer for economic growth and accelerate the rebound to pre-pandemic levels of activity, Michelle Meyer, the head of US economics at Bank of America, said in a Thursday note. The package would likely prioritize another round of direct payments, an extension of federal unemployment benefits, funds for state and local governments, and relief for healthcare workers.
A $1 trillion relief package could “easily” boost gross domestic product growth in 2021 by 1 percentage point to roughly 6%, according to the bank. The positive economic effect could be even larger, as the estimates hinge on conservative spending multipliers, Meyer added.
Economists at Morgan Stanley and Goldman Sachs similarly linked optimistic GDP projections to Democrats’ wins in Georgia. Credit Suisse raised its S&P 500 forecast on Thursday, saying the increased likelihood of new stimulus in early 2021 could drive the index 12% higher through the year.
Concerns that the Washington riots would create a lasting risk were largely alleviated Thursday morning. Congress certified Biden’s victory after hours of debate and failed efforts to object to Electoral College vote counts. Trump pledged to conduct “an orderly transition” soon after, reversing from previous claims that he won the election and would remain in office.
The ensuring of a peaceful transition further augmented bullish sentiments. All three major stock indexes notched record intraday highs on Thursday as investors viewed the certification as a return to business as usual.
“With the political tensions easing, more stimulus expected to help boost the economy, and coronavirus vaccines helping bring a measure of calm to investors and traders, it seems that the market can now focus on earnings season,” JJ Kinahan, the chief market strategist at TD Ameritrade, said.
TWITTER: https://twitter.com/Dan_Takahashi_ INSTAGRAM: https://www.instagram.com/dantakahashi1/ FACEBOOK: https://www.facebook.com/DanTakahashiJP/ LINKEDIN: https://www.linkedin.com/in/dan-takah… I’m building a new company and recruiting team members who live in Tokyo! If you meet the criteria, please email daniel@dkocapital.net with your (1)experience and (2)education background! ■ Software engineer (1), development of iOS or Android Social Media & Business News App, over 2 years experience ■ Software engineer (2), development of iOS or Android Investing App, over 2 years of experience ■ Attorney, specialized in Japanese Financial Instruments and Exchange Law, more than 5 years of experience ■ Quants analyst, investing algorithm development, more than 3 years of experience ■ Portfolio Manager, asset management of large fund, over 5 years experience ■ Professor from Top Japan Univeristy, specializing in finance, more than 5 years of experience ■ Previous Important Videos! Create a Long Term Investment Portfolio? https://youtu.be/Vdwx4z0rJ-g Short Term Investing….Key is to Find the Trend? https://youtu.be/TMLWUjlb_wU Top ETFs for your portfolio? https://youtu.be/Yfv3PvPKeuM AVOID Leverage & Inverse ETFs? https://youtu.be/tDoQgr1OLf8 3 Secrets to CUTTING LOSSES? https://youtu.be/KA8vIaaEXYI ■ Chart Technical analysis Videos RSI – https://youtu.be/plpR2HOWyM4 BOLLINGER BAND – https://youtu.be/Hkn2F3pJyuc MACD – Find the Trend? https://youtu.be/nNt5s8PwjkQ Pivot Point Analysis – https://youtu.be/aQWotA5yT7A ■ Media Inquires please Contact: daniel@dkocapital.net ■ Dan Takahashi Profile ・560k total Followers (bit over 6 months) ・Cornell University, Honors Magna Cum Laude ・Entrepreneur, Investor, Media Commentator Born in Tokyo, half-Japanese, half-American. Have lived in 6 countries and visited over 60 countries! Started investing at 12 years old, began Wall Street when 19, created hedge fund when 26, and sold company stake at 30 years old. I love nato beans & karaoke ❤❗ ■ Japanese Channel https://www.youtube.com/channel/UCFXl…#stockmarket#dantakahashi#investing
US stocks gained in the first trading session of 2021 on Monday as investors returned from the New Year holiday.
Bitcoin surged and then dropped in a volatile trading session. The popular cryptocurrency hit record highs just below $35,000 on Sunday before falling as much as 17% in Monday trades to levels not seen since last week. Bitcoin’s fall was its steepest since March.
Here’s where US indexes stood shortly after the 9:30 a.m. ET open on Monday:
Herbalife fell in Monday trades after billionaire investor Carl Icahn sold $600 million worth of shares in the company and gave up board seats.
Oil prices were mixed. West Texas Intermediate crude dropped 0.33%, to $48.36 per barrel. Brent crude, oil’s international benchmark, rose 0.14%, to $51.87 per barrel.
Capital.com 88.6K subscribers Watch our detailed S&P 500 forecast 2021 and see where the stock market will be headed throughout the coming year. Despite all the economic turmoil that this year has brought to the world, 2020 has actually been stellar for the stock market, and many further growth for S&P 500 in 2021. So much so that many analysts have already predicted more double digit gains in their SP500 index forecast. The distribution of new COVID-19 vaccines is largely what is considered to be a strong driver for the SP500 analysis 2021 due to the lasting economic recovery that it implies.
In fact, JPMorgan Chase has even stated that these are among the best conditions for sustained gains in years as far as the SP500 outlook 2021 goes. With that in mind, all the most prominent projections for the SP500 target 2021 range from 3,800 to 4,200. And some of these SP500 estimates 2021 are even fairly modest, as they don’t all consider a positive vaccine outcome. And if the results of the vaccine do prove positive, then there’s room for even more upside in the SP500 forecast. Hence, for SP500 investing, 2021 may actually prove to be the best year in history. But there’s also another take on the SP500 prediction 2021, which we will cover in today’s video. Stay tuned for our full SP500 forecast 2021.
And find out what the SP500 futures forecast has in store for the coming weeks. Have your own SP 500 futures forecast 2021 in mind? Let us know in the comments! Give us a thumbs up if you liked our “SP 500 Technical Analysis 2021” video, and leave us a comment down below with your thoughts on the current market situation. And for the latest updates on the SP 500 forecast analysis 2021, be sure to subscribe to the Capital.com channel! #SP500#SP500Forecast#SP500Futures
NEW YORK, NEW YORK – JULY 23: People walk along Broadway as they pass the Wall Street Charging Bull statue on July 23, 2020 in New York City. On Wednesday July 22, the market had its best day in 6 weeks. (Photo by Michael M. Santiago/Getty Images)
Credit Suisse analyst Jonathan Golub introduced his 2021 price target for the S&P 500 (^GSPC) of 4,050, implying 12.2% upside from Tuesday’s closing levels. Underpinning this upbeat call is his assumption that two years from now, the post-virus economic recovery will have already hit a peak.
“Our 2021 forecasts are designed to answer a simple question: what will the future (2022) look like in the future (end of 2021),” Golub said in a new note Wednesday. “From this perspective, we are forced to de-emphasize the near-term, focusing instead on the return to a more normal world.”
“As we look toward 2022, the virus will be a fading memory, the economy robust, but decelerating, the yield curve steeper and volatility lower, and the rotation into cyclicals largely behind us,” he added.
Based on Golub’s analysis, economic activity as measured by GDP growth will renormalize at levels slightly above trend, or with quarterly annualized growth rates just over 3%, starting in the second half of 2021.
Since the stock market discounts future events, each of these prospects for further improvement down the line should translate into a higher S&P 500 as investors price in these events.
Analysts have already begun to account for an anticipated improvement in corporate profits, as S&P 500 earnings per share (EPS) have on aggregate sharply topped consensus expectations so far for each of second and third quarter results this year.
“We expect 2020 estimates to rise, 2021 to remain stable and 2022 to moderate,” Golub said.
His 2021 S&P 500 price target of 4,050 is based on earnings per share of $168 next year, for an improvement of 20% over the expected aggregate EPS this year. He expects EPS will then rise to $190 in 2022.
Sector leadership
On a sector basis, Golub rates technology stocks as Overweight for 2021, given their “faster sales growth, superior margins, robust FCF [free cash flow], and low leverage. He also rated financials, one of the laggard sectors so far for the year-to-date, as Overweight, given their propensity to lead during recoveries.
“Consistent with a typical recovery, banks should benefit from improving credit conditions, increasing transaction volumes, and a steepening yield curve,” Golub said. “The group is adequately reserved, likely. resulting in a greater return of capital.”
Golub designated cyclicals with a Neutral rating for next year, saying he is “positively inclined toward economically-sensitive groups and believe[s] their momentum should persist over the near-term.” But he added that he thinks the largest quarter-over-quarter improvements in economic activity have already come and gone, leaving more tepid further upside potential for stocks with profits closely tethered to economic growth.
He rated non-cylicals like consumer staples as underweight, while giving health care specifically an Overweight rating.
“Non-cylicals should lag in an improving economy as falling volatility supports higher P/Es (price-earnings multiples) for riskier assets, and rising rates make their high dividend yields less appealing,” he said. “The one exception is health care, which should outperform given a more robust earnings trend.”
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