Stocks fell slightly Friday morning, with equities hovering just below record levels.
Both the S&P 500 and Nasdaq ended Thursday’s regular trading day at fresh record closing highs as tech stocks outperformed. The Dow ended just a tick below its own recent record closing level. U.S. stocks tracked declines in overseas equities, after new data showed that UK gross domestic product (GDP) slumped by a record 9.9% in 2020 as a virus-induced recession swept the country.
Shares of Dow component Disney (DIS) increased about 1% after the company posted a surprise quarterly profit and grew Disney+ streaming subscribers more than expected, as the company aggressively builds out its direct-to-consumer business. Newly public company Bumble (BMBL), which began trading on the Nasdaq on Thursday, rose another 8% after jumping 63% in its public debut.
Over the past couple weeks, investors have absorbed a bevy of much stronger than expected earnings results, with corporate profits rebounding much faster than expected despite the ongoing pandemic. With more than 80% of companies now having reported fourth-quarter results, S&P 500 earnings per share (EPS) have topped estimates by 17% in aggregate, and bounced back above pre-COVID levels, according to an analysis by Credit Suisse analyst Jonathan Golub.
“Prompt and generous government action mitigated the [virus-related] damage, leading to outsized economic and earnings surprises,” Golub said. “The earnings recovery has been substantially more robust than we could have imagined when the pandemic first took hold.”
Stocks have continued to set fresh record highs against this backdrop, and as fiscal and monetary policy support remain robust. But as investors become accustomed to firming corporate performance, companies may need to top even greater expectations in order to be rewarded. This could in turn put some pressure on the broader market in the near-term, and warrant more astute assessments of individual stocks, according to some strategists.
“It is no secret that S&P 500 performance has been quite strong over the past few calendar years, driven primarily through valuation expansion. However, with the index P/E [price-to-earnings ratio] recently eclipsing its previous dot-com high, we believe that valuation multiples will begin to compress in the coming months,” BMO Capital Markets strategist Brian Belski wrote in a note Thursday. “According to our work, strong EPS growth will be required for the next leg higher. Fortunately, that is precisely what current expectations are forecasting. However, we also found that these sorts of ‘EPS-driven’ periods tend to be more challenging from an investment strategy standpoint.”
“We believe that the ‘easy money days’ are over for the time being and investors will need to tighten up their focus by evaluating the merits of individual stocks, as opposed to chasing the momentum-laden strategies that have recently dominated the investment landscape,” he added.
—
10:15 a.m. ET: Consumer sentiment unexpectedly plunges to a six-month low in February: U. Michigan
U.S. consumer sentiment slid to the lowest level since August in February, according to the University of Michigan’s preliminary monthly survey, as Americans’ assessments of the path forward for the virus-stricken economy unexpectedly grew more grim.
The headline consumer sentiment index dipped to 76.2 from 79.0 in January, sharply missing expectations for a rise to 80.9, according to Bloomberg consensus data.
The entire loss in February was “concentrated in the Expectation Index and among households with incomes below $75,000. Households with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than anytime since 2014,” Richard Curtin chief economist for the university’s Surveys of Consumers, said in a statement.
“Presumably a new round of stimulus payments will reduce financial hardships among those with the lowest incomes. More surprising was the finding that consumers, despite the expected passage of a massive stimulus bill, viewed prospects for the national economy less favorably in early February than last month,” he added.
—
9:30 a.m. ET: Stocks open lower, but pace toward posting weekly gains
Here’s where markets were trading just after the opening bell:
-
S&P 500 (^GSPC): -8.31 points (-0.21%) to 3,908.07
-
Dow (^DJI): -19.64 (-0.06%) to 31,411.06
-
Nasdaq (^IXIC): -53.51 (+0.41%) to 13,970.45
-
Crude (CL=F): -$0.23 (-0.39%) to $58.01 a barrel
-
Gold (GC=F): -$10.70 (-0.59%) to $1,816.10 per ounce
-
10-year Treasury (^TNX): +3.2 bps to yield 1.19%
—
9:05 a.m. ET: Equity funds see highest weekly inflows ever as investors pile into tech stocks: Bank of America
Stock funds just saw their largest-ever week of inflows for the period ended February 10, with inflows totaling a record $58.1 billion, according to Bank of America. Investors pulled a total of $800 million out of gold and $10.6 billion out of cash during the week, the firm added.
Tech stocks in turn saw their own record week of inflows at $5.4 billion. U.S. large cap stocks saw their second-largest week of inflows ever at $25.1 billion, and U.S. small cap inflows saw their third-largest week at $5.6 billion.
Bank of America warned that frothiness is rising in markets, however, as investors keep piling into stocks amid low interest rates, and hopes of a strong recovery for the economy and corporate profits. The firm’s proprietary “Bull and Bear Indicator” tracking market sentiment rose to 7.7 from 7.5, nearing an 8.0 “sell” signal.
—
7:14 a.m. ET Friday: Stock futures point to a lower open
Here were the main moves in markets, as of 7:16 a.m. ET Friday:
-
S&P 500 futures (ES=F): 3,904.00, down 8.00 points or 0.2%
-
Dow futures (YM=F): 31,305.00, down 54 points or 0.17%
-
Nasdaq futures (NQ=F): 13,711.25, down 17.75 points or 0.13%
-
Crude (CL=F): -$0.43 (-0.74%) to $57.81 a barrel
-
Gold (GC=F): -$9.50 (-0.52%) to $1,817.30 per ounce
-
10-year Treasury (^TNX): +0.5 bps to yield 1.163%
—
6:03 p.m. ET Thursday: Stock futures tick higher
Here’s where markets were trading Thursday as overnight trading kicked off:
-
S&P 500 futures (ES=F): 3,904.50, down 7.5 points or 0.19%
-
Dow futures (YM=F): 31,327.00, down 32 points or 0.1%
-
Nasdaq futures (NQ=F): 13,703.5, down 25.5 points or 0.19%
—
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.
Find live stock market quotes and the latest business and finance news
For tutorials and information on investing and trading stocks, check out Cashay
[ad_2]
Source