Monday September 27, 2021

Global stocks end volatile week at records on economic strength

AFP
July 25, 2021

New York: US and European stocks enjoyed a banner to close out a volatile week, helped by the eurozone's economic recovery and anticipation of more blowout US earnings next week after this week´s positive round of results.

All three major US indices closed at record highs, with the Dow Jones Industrial Average surging 0.7 percent to finish above 35,000 points for the first time.

The records marked a sharp reversal from the sentiment at the start of the week, when the Dow suffered its worst session of 2021 amid worries over rising infections of the Delta variant of the coronavirus.

"It's been quite the tumultuous week," noted Russ Mould, investment director at AJ Bell.

"Investors who panicked when global markets took a dive on Monday may now be regretting their decisions to dump holdings."

Maris Ogg of Tower Bridge Advisors said many of the companies that reported this week were upbeat about the outlook and not overly worried about the Delta variant.

"It's encouraging that we are making new highs in the middle of the earnings season," Ogg said, adding that the underlying demand growth in a reopening economy remains strong."

We see a continuation of the last couple days. It's a roller coaster in reverse. We did the drop first, and we’ve been climbing back to the top ever since," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

Growth and value stocks seesawed for much of the week as market participants weighed spiking infections of the COVID-19 Delta variant against strong corporate results and signs of economic revival.

"There’s push and pull, there’s clearly conflict in the market," Zaccarelli added.

"There’s a strong difference of opinion as to whether the future’s bright or whether there are clouds on the horizon."Market participants now look toward next week with the Federal Reserve's two-day monetary policy meeting and a series of high-profile earnings.

The Fed's statement will be parsed for clues regarding the timeframe for tightening its accommodative policies, although Chairman Jerome Powell has repeatedly said the economy still needs the central bank's full support.Unofficially, the Dow Jones Industrial Average rose 238.34 points, or 0.68 percent, to 35,061.69, the S&P 500 gained 44.33 points, or 1.02 percent, to 4,411.81 and the Nasdaq Composite added 152.39 points, or 1.04 percent, to 14,836.99.Second-quarter reporting season is firing all pistons, with 120 of the companies in the S&P 500 having reported.

Of those, 88 percent have beaten consensus, according to Refinitiv."We’re seeing companies, on average, beat on the top and on the bottom line," Zaccarelli said.

"We’re seeing the resilience of the consumer and that’s been the story of the earnings season so far."Analysts now expect aggregate year-on-year S&P 500 earnings growth of 78.1 percent for the April to June period, a sizeable increase from the 54 percent annual growth seen at the beginning of the quarter.

Shares of chipmaker Intel Corp fell after said late Thursday that it still faces supply constraints and provided disappointing guidance. read moreAmerican Express Co gained following the release of second-quarter results, which handily beat expectations on the strength of a global recovery in consumer spending. read moreSocial media firms Twitter Inc and Snap Inc advanced on the back of their upbeat results.

Those reports gave a boost to shares of Facebook Inc, which is due to post second-quarter results next week.Other high-profile earnings expected next week include Tesla Inc, Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com.Industrials Lockheed Martin Corp, Boeing Co, Ford Motor Co, General Dynamics Corp, 3M Co, Caterpillar Inc, Chevron Corp and Exxon Mobil Corp, along with a host of healthcare, consumer goods and others, are also on deck.

Earlier, European bourses also enjoyed handsome gains following a survey that showed business activity in the eurozone at its fastest rate in 21 years in July.

The eurozone PMI composite index from economic data group IHS Markit said activity rose from 59.5 in June to a strong 60.6 in July, well above the 50-point level that indicates growth.

But the survey also showed that the coronavirus´s dominant Delta variant was

starting to chip away at business confidence, with concern growing that new measures could again sow chaos in business activity.

Mould said attention would turn to next week's Federal Reserve policy meeting, as traders search for clues as to when central banks might raise interest rates to tame inflation.

The European Central Bank on Thursday said that while the eurozone was bouncing back strongly, it would maintain favorable monetary policies until at least the end of March 2022, or until officials feel "the coronavirus crisis phase is over."

Besides the Fed, next week´s US calendar also includes a heavy schedule of earnings, including reports from Apple, Amazon and other tech giants, as well as from Boeing and ExxonMobil.