After a sharp drop on Monday, the market found a way to finish the week at ALL-TIME HIGHS. Each of the three major indexes experienced their highest closes ever. Obviously if the market closes Monday in the green, this will be another set of highs, but how long can the upward drive last? Fresh highs can never be a bad thing, but it certainly is coming at a peculiar time. We will dive in on what has caused the leg up, and why the market seems to be beating the odds right now.
This Earnings Season Couldn’t Be Better
TJ prepped the earnings season very well back on July 12th. Checkout what he had to say below!
Various different companies have been reporting great earnings. This results in their share prices receiving a boost as well. Technology has done very well so far, especially Twitter ($TWTR) and Snap ($SNAP). The photo-sharing app reported a .10 cent growth in EPS despite being expected to report a .01 cent loss. This was mostly attributed to Snap’s operation being unaffected by iOS 14.5 privacy regulations. Twitter on the other hand beat their expected .07 cent growth in EPS by a whole .13 cents! Already in the middle of a great year, Twitter jumps on earnings with rumblings of their first subscription based plan for users.
The grass is green and can certainly get greener this week, even after all-time highs. Look out for earnings results from notable companies such as Google on Tuesday with a 19.34 estimated growth in EPS, and Amazon on Thursday with a 12.25 estimated growth.
The World Isn’t In Great Shape
According to Fortune, 83.2% of Covid cases are at a result of the new Delta variant. Two weeks ago, the number was only around 50%. The fast growth of this new strain is very alarming, and mask mandates have come back already in some states. It feels weird to still be writing about the coronavirus’ effect on the market more than a year later, but here we are.
The virus originally sent businesses into a frantic standstill, and the economy struggled. Now though, it seems like everyone is trying to avoid the dangerous new strain. Maybe it is because the vaccine seems to combat the strain well. But not everyone is vaccinated. If one number catches up to the next number, the world could once again be in deep trouble. Ed Clissold, a strategist for Ned Davis Research says that because of the virus and unexpected new highs, days like last Monday will happen more frequently. On Monday, the market had a little “flash crash” dropping 725 points, its biggest 1-day loss since October.
The current shortage around the world is odd as well. Materials are hard to get, but those on the delivery end are charging high prices. The shortage is trickling down the supply chain, but as long as you are able to make a sale, you are alright. Let’s just hope things don’t get bottlenecked!
It’ll Be Rocky
The market was rocky this week, and that surely won’t end. It has to come off its all-time highs, but the earnings will push it higher. But worsening pandemic worries could bring it down. If supply chains survive and improve profit margins in an unorthodox way, earnings per share reports will rise.
I threw out a lot of different outlooks on the market for a good reason; there is a lot going on in the market right now. It can be hard to time the market, but not to pace it. Take extra caution with your market moves in the coming weeks.