Weekly Snapshot May 3rd, 2021
Market Review: Week Ending 4/30/2021
Major market indexes were mixed for the week. A strong U.S. economic rebound and robust corporate earnings were offset by worsening overseas COVID cases (particularly in India and Brazil) threatening global growth projections. For the week, the Dow Jones Industrial Average (DJIA), NASDAQ Composite (NASDAQ), and Russell 2000 Index (R2000) were all down -0.50%, -0.39%, and -0.24% respectively. Bucking this trend was the S&P500 Index (S&P500) which return +0.02%.1
For the week, the Russell 1000 Value index (+0.43%) outperform the Russell 1000 growth index (-0.55%).2 Within S&P 500 sectors, outperformers for the week were Energy +3.59%, Communications Services +2.87%, and REITs +1.09% while sector underperformers were Technology -2.12%, Healthcare -1.90%, and Consumer Staples -0.06%.3
For the quarter, most companies in the S&P500 have beaten analyst’s expectations with 87% reporting better than expected earnings, higher than the historical average of 65%.4 Over the last 25 years, companies have beaten earnings estimates on average by 3.6% versus 22.8% currently. Theses strong results have led to the fastest rate of earnings growth since 2010.5 However, the stock market’s reaction has been muted as earnings expectations were already high and peak earnings growth began to be questioned. On the economic front, 1st Quarter U.S GDP grew at an annualized rate of 6.4%. A big surge in consumption and growth in housing and business investment led results.6 For the first time since the pandemic began, state and local spending also added to growth. Boosted by two rounds of stimulus payments this year, personal savings as a percent of disposable income jumped from 13.9% to 27.6% providing fuel for faster economic growth.7
April’s Federal Reserve meeting was a non-event. The policy statement was little changed with Chairman Powell continuing to emphasize an improving economy with temporary price increases due to supply bottlenecks. With a focus both on inflation and employment, policymakers are not likely to act preemptively – raising interest rates. .6
WHAT WE WILL BE WATCHING THIS WEEK
Various economic reports on the health and direction of the economy:
- Institute for Supply Management’s Manufacturing index.
- U.S. Department of Commerce – Vehicle sales.
- U.S. Census Bureau – Construction spending.
- Institute for Supply Management’s Non-Manufacturing index.
- U.S. Bureau of Labor Statistics – Nonfarm payrolls and unemployment rate.
STOCKS IN THE NEWS
- Microsoft Corporation’s (MSFT – held in Fundamentum GIE) 3rd quarter revenue of $41.74B was +1.7% above estimates of $41.04B while earnings-per-share of $1.95 beat consensus by $0.17. Productivity and Business Processes, Intelligent Cloud, and Personal Computing revenues beat consensus by +0.4%, +1.6%, and +4.7%, respectively. Azure cloud growth was +46% Y/Y above consensus of +42%. However, the stock was down (2.4%) after the release, largely on a Q/Q deceleration in Azure growth from +48% in F2Q.8
- Boeing Company (BA) shares traded down after releasing earnings in which revenue of $15.22B missed by (0.1%), operating margins of (0.5%) missed by (110) bps and earnings-per-share of ($1.53) missed by ($0.56). Deliveries continue to be the focal point as lingering issues with the 737 Max and challenged 787 delivery execution remain overhangs for the company. However, as domestic air travel continues to recover more timely delivery of aircrafts is likely.9
- Ford Motor Company (F) reported earnings ($0.89 vs $0.22) and EBIT ($4.8B vs $1.7B) above estimates however revenues fell short ($33.6B vs $36.1B). Despite strong earnings shares traded down approximately 10% because Ford now expects to lose about 1.1M units of production this year due to the semiconductor shortage.10
As always, we appreciate your confidence in our team.
Fundamentum Investment Committee
John Nichol, CFA® – Chief Investment Officer
Trevor Forbes – Investment Committee
Robert Armagno – Investment Committee
Christopher A. Silipigno, ChFC® – Investment Committee
Christopher G. King – Investment Committee
Timothy J. Shumsky – Investment Committee
1 FactSet – 4/30/2021
2 JPMorgan Asset Management – 5/3/2021
3 FactSet – 4/30/2021
4 Wall Street Journal – 5/3/2021
5 Wall Street Journal – 5/3/2021
6 Goldman Sachs Asset Management – 4/30/2021
7 Edward Jones Weekly Stock Market Update – 4/30/2021
8 FactSet – 4/28/2021
9 FactSet – 4/29/2021
10 FactSet – 4/28/2021
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Investment advice offered through Fundamentum LLC a registered investment advisor. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the investment objective of any investment strategy will be attained. Investing involves risk including loss of principal. Past performance is no guarantee of future performance. All indices are unmanaged and may not be invested into directly.