S&P 500 futures were little changed early Monday, as Wall Street prepares for the busiest week of earnings, which will include reports from some of the largest tech companies.
Futures tied to the broad equity benchmark were flat. Nasdaq 100 futures added 0.9%. Futures on the Dow Jones Industrial Average, which are less linked to technology shares, shed about 160 points.
This coming week 13 Dow components and 111 S&P 500 companies are set to report earnings. Among the quarterly reports on deck include those from Apple, Microsoft, Netflix, Tesla, McDonald’s, Honeywell, Caterpillar and Boeing.
Apple shares gained 2% in premarket trading to about $142 a share before its quarterly report Wednesday after the bell. Tesla, which also reports Wednesday, was up 1.5%
“The Street is anticipating robust results from Apple on Wednesday after the bell with Cupertino expected to handily beat Street estimates across the board,” wrote Dan Ives of Wedbush, who raised his 12-month price target on Monday to $175. “While the Street is forecasting roughly 220 million iPhone units [for 2021], we believe based on the current trajectory and in a bull case Cupertino has potential to sell north of 240 million units.”
Companies kicked off the earnings session on a strong note. Of the S&P 500 components that have already reported earnings, 73% have beaten on both sales and EPS, according to data from Bank of America, of The firm said this is tracking similar to last quarter when the number of companies beating hit a record.
Wall Street is coming off a winning week amid the strength in the technology sector. The Dow registered its fifth positive week in six while the S&P 500 posted its third positive week in four. The Nasdaq advanced 4.19% last week for its best week since November and the fifth positive week in six as shares of Big Tech names pushed the index to a new all-time high.
The move higher came as President Joe Biden tries to push through a $1.9 trillion stimulus program that many congressional Republicans oppose. The fiscal aid includes direct checks to millions of Americans, aid to state and local governments, funding for Covid vaccines and testing, a boost to the minimum wage and enhanced unemployment benefits, among other things.
Lindsey Bell, chief investment strategist for Ally Invest, noted any additional stimulus could lead to a surge in inflation.
“Right now, watch for signs of inflation as a temporary or more long-term trend. If it’s just a quick shock, we may see some market weakness without any major Fed action,” she noted. “On the other hand, persistently high inflation may force the Fed to consider raising rates and pulling back their market support.”
In an inflationary environment, Bell said investors should favor the consumer staples, energy and financials sectors. She added that real estate and gold are among the other assets that can help hedge against inflation.
The number of coronavirus cases continues to tick up in the U.S. and abroad, but many economists are forecasting a return to growth later this year.
“We continue to expect that a reduction in virus risk due to mass vaccination coupled with fiscal support for consumer spending will lead to a mid-year consumption boom and very strong growth in 2021,” Jan Hatzius, chief economist at Goldman Sachs, said in a note to clients over the weekend. “We currently forecast GDP growth of +6.6% on a full-year basis, 2½pp above consensus,” he added.
However, the firm noted that while risks like insufficient fiscal aid look now look less likely, other risks remain. Hatzius cited consumers remaining more cautious than expected as well as the evolution of a vaccine-resistant virus strain as potential future headwinds for the market.
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