All the investors over the globe are keenly looking forward to the future quarterlyreports of US companies and their predictions concerning the economic recovery that is likely to happen in the second quarter of 2021 because some people worry that the recent economic upward momentum is weakening.The US Treasury bonds, with a fear of the economic growth slowing down in the second quarter of 2021 over the process, rebounded sharply this week, and yields fell to their lowest level since February. In the stock market, financial, energy, and other so-called value stocks related to economic recovery have seen a sell-off.
Profits in the second quarter jumped sharply, which is expected to mark the peak of US corporate profit growth and the recovery from the collapse in profits caused by the epidemic last year. According to Refinitiv IBES data, the profits of S&P 500 index companies are estimated to have soared 65.8% year-on-year. As data by Refinitiv IBES hint that the economy has the largest scope and potential to rise up since 2009’s fourth quarter after the crisis of finance. JP Morgan Chase, Goldman Sachs, Bank of America, and other large banks will begin to release earnings reports on Tuesday, kicking off the earnings season. These particular reports of finance and earning can most probably put forth preliminary clues regarding the economy as well as the growth-related stocks.
Most U.S. banks, which are the major ones too, are expected to witness a rapid recovery in quarterly profits, even though with the recent trend, the income from trading has stagnated, and the rate of revenue has slowed down because of the interest rates being low and weak demand.Investors are also eager to evaluate whether corporate profits will support the rise in US stocks. The S&P 500 index has observed a sharp rise of about16% so far this year. Many market observers said that this year’s expected surge in corporate profits is an important reason for the strong market performance. However, the latest US unemployment claims data is weaker than expected, and the spread of the Delta new crown virus variants have intensified investors’ doubts about the reopening of the economy.
Keithe Lerner, the chief market strategist at Trust Advisory Services, said that it is for the same season of earnings, that what the investors are expecting to notice and what they are expecting is that the profit trend of value stocks remains unchanged, and it is too early to support exit transactions. He also added that from next week’s bank stocks, they would see the results. Lerner and many other investors are still positive about industries that are sensitive to economic cycles, such as energy, finance, and industry, which have been regarded as value transactions due to poor performance over the years. At the sametime, the S&P 500 Growth Index rose, and the yield on the benchmark 10-year U.S. Treasury fell, boosting the rise of technology stocks.
The portfolio manager, Gary Bradshaw, at Hodges Capital Management in Texas, said that although corporate conditions are not perfect, the earnings season should confirm the strength of the economy. He favors energy, materials, catering, and some retailers. According to Refinitiv data, among the various industries, the industrial, consumer discretionary, energy, and materials industries are expected to have the largest year-on-year increase in profits, of which the industrial sector is most likely to have witnessed an increase of more than 500%. Data Trek Research co-founder Nicholas Colas wrote in a report this week that the second-quarter profit forecast may still is too low. The senior global market strategist Sameer Samana at Wells Fargo Investment Institute said that people would also pay attention to how companies can pass on the increase in raw material prices. Economic data in most recent months have shown signs of these pressures.