Weekly Snapshot October 26, 2021
Market Review: Week Ending 10/22/2021
Strong corporate earnings and positive economic reports drove equities markets higher, with the Dow Jones Industrial Average (DJIA) and the S&P 500 Index (S&P500) setting record highs. For the week, the DJIA rose +1.12%, and the S&P500 increased +1.66%. Following these markets higher, the Russell 2000 Index (R2000) advanced +1.14%, and the NASDAQ Composite (NASDAQ) moved +1.30%.1 Within S&P 500 sectors, outperformers for the week were REITs +3.24%, HealthCare +2.87%, and Financials +2.79% while sector underperformers were Communication Services -0.61%, Consumer Staples +0.79%, and Materials +0.86.2 As investors gained confidence and markets rebounded from September’s pullback, volatility fell to new lows. The CBOE Volatility Index (15.01) fell to its lowest level since February 2020.3
With approximately a quarter of S&P500 companies reporting, 3rd quarter earnings have beat consensus expectations by over 13.4%. Although down from the 16.5% second quarter, the beat is still well ahead of the average 8.4% positive surprise rate.4 Earnings were surprisingly strong given the negative momentum in the economy due to the Delta Variant and headwinds with respect to input cost pressures and labor shortages.
Besides supply chain and labor constraints, rising oil prices are now feeding inflation fears. West Texas crude oil rose for the tenth week in a row, pushing crude through $84 per barrel. The strength and stickiness of increasing prices have called into question the “transitory” nature of inflation. As a result, government bond yields are pushing higher. During the week, the 10-year U.S. Treasury yield reached 1.69% – the highest level in more than five months.5
WHAT WE WILL BE WATCHING THIS WEEK
Various economic reports on the health and direction of the economy:
- New Home Sales – U.S. Census Bureau
- Consumer Confidence Index – The Conference Board
- Durable Goods Orders – U.S. Census Bureau
- GDP 3rd Quarter Estimate – U.S. Bureau of Economic Analysis
- Unemployment Claims – U.S. Department of Labor
- University of Michigan Index of Consumer Sentiment
STOCKS IN THE NEWS
- Johnson & Johnson (JNJ – held in Fundamentum GIE) traded higher after reporting 3rd quarter earnings-per-share of $2.60 versus consensus estimates of $2.35. Year-over-year revenue growth was over 11% due to a rebound in doctor’s visits and medical procedures disrupted by the pandemic. Management also noted that it sold $502 million of COVID-19 vaccines in the third quarter.6
- Procter & Gamble (PG – held in Fundamentum GIE) traded lower despite reporting quarterly revenues and earnings that beat estimates. Earnings-per-share were $1.61 versus $1.59, with revenues reported at $20.3 billion versus $19.9 billion. Management raised its inflation expectations for input cost by over $400 million – predicting higher commodity and freight costs in 2022.7
- Verizon (VZ – held in Fundamentum GIE) traded higher after reporting above-consensus earnings of $1.41 per share versus $1.36. Although revenues came in below expectations ($32.9 vs $33.2 billion), management increased its full-year guidance, reflecting strong sales growth due to 5G adoption.8
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
1 JPMorgan Weekly Market Recap – 10/25/2021
2 FactSet – 10/22/2021
3 Dow Jones – 10/22/2021
4 FactSet – 10/22/2021
5 John Hancock Weekly Market Recap – 10/22/2021
6 FactSet – 10/20/2021
7 FactSet – 10/20/2021
8 FactSet – 10/20/2021
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