E Tuesday Talk: More Market Stimulation

Positive signals on the stimulus bill in the Senate amidst positive U.S. manufacturing data helped drive the market higher on Monday, overriding some of the corrective actions of last week. Data for U.S. state tax revenues show that somes states recorded better than expected revenues for the period April-December 2020, indicating that economic activity during the pandemic (in some areas of the country)has been better than anticipated.  Yesterday, the S&P 500 closed at 3,902, up 2.38%, the Dow closed at 31,535, up 1.95% and the Nasdaq closed at 13,589 up 3.01%. A strong kick-off to the week for sure. Currently, futures for all 3 indices are light red.

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Mike Mozart, Flickr

TalkMarkets contributor Jharonne Martis looks at retail sales in Q4 2020 U.S. Retail Scorecard – Update, March 1 and finds that "Of the 149 companies in the index that have reported earnings to date, 69% have reported earnings above analyst expectations, 3% matched and 28% reported earnings below analyst expectations. The Q4 2020 blended earnings growth estimate is -10.7%. The Q4 2020 blended revenue growth estimate is 7.7%. Sixty-nine percent have reported revenue above analyst expectations, and 31% reported revenue below analyst expectations."

Both Target (TGT) and Kohls (KSS) come out as companies to watch in the coming quarters. Martis includes several charts on the 2020Q4 retail sector results. Below is the chart for 14 retailers for same store sales and earnings, showing expected results and actuals for those companies who have reported.

Elsewhere contributor Yohay Elam who has been concerned about the amount of money the Fed has been putting into circulation for some time looks ahead to what we might expect to hear from Jerome Powell later in the week in his article Powell Preview: Three Scenarios For The Fed To Defuse The Bond Bonfire, Market Implications.

"King Dollar has since edged lower as markets await another speech by Powell – his last public appearance before the Fed’s “blackout period” leading to its rate decision. How will he shape expectations?

How will markets react? Here are three scenarios:

1) Same-same – dollar resumes gains

Powell may stick to his previous script – saying that any inflation will likely be transitory and that there are still ten million Americans out of work. More importantly for markets, if he says that higher yields are a healthy sign of better growth prospects, he would give bond vigilantes a green light for another sell-off.

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Susan Johnson 1 month ago Member's comment

Enjoyed the piece by Jim Boswell, thanks for sharing the link.