Investors look to upcoming U.S. earnings for a view into 2021
By Caroline Valetkevitch NEW YORK (Reuters) - Investors will be anxious to see whether upcoming quarterly reports and outlooks from U.S. companies validate expectations for a strong 2021 rebound in earnings and the economy, which were ravaged by the coronavirus pandemic last year. U.S
By Caroline Valetkevitch
NEW YORK (Reuters) - Investors will be anxious to see whether upcoming quarterly reports and outlooks from U.S. companies validate expectations for a strong 2021 rebound in earnings and the economy, which were ravaged by the coronavirus pandemic last year.
U.S. stocks are at record highs, boosted largely by optimism that the rollout of vaccines to fight the COVID-19 virus will allow for that recovery, while hopes of more fiscal stimulus under U.S. President-elect Joe Biden have also underpinned the market.
Earnings reports for the last quarter of 2020 kick off this week, with the release of results from JP Morgan, Citi and other big banks.
Earnings for S&P 500 companies are expected to have dropped 9.8% in the fourth quarter from a year ago, according to IBES data from Refinitiv.
But earnings are expected to rebound this year, with a gain of 16.4% projected for the first quarter. That forecast has improved since the fall, while S&P 500 earnings are expected to grow 23.6% in 2021, benefiting from easy comparisons with 2020.
Investors may be even more keen to find out what company executives say about 2021 than they are to see fourth-quarter results, which come as virus cases are surging across the United States and Europe.
"Managements and analysts are really going to be focused not necessarily on the rear mirror. They're really thinking about 2021," said Kenneth Leon, research director at CFRA Research.
What's also going to be key is "the pulse of each sector and how it affects investors in terms of thinking whether there's an attractive value there or whether they might need to take a breather," Leon said.
The S&P 500 is trading at 22.7 times forward earnings, well above the long-term average of about 15, based on Refinitiv's data.
"Stocks already reflect a pretty positive outlook for earnings," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
Energy <.SPNY> and industrials <.SPLRCI> are expected to have had the biggest percentage year-over-year declines in earnings among S&P 500 sectors in the fourth quarter, based on Refinitiv's data.
While economically sensitive sectors such as those have been outperforming the broader market in recent months, they still lagged technology for 2020, and their valuations in general are seen by some as less pricey than other sectors.
At the same time, materials, also an economically sensitive sector, is expected to have had the biggest percentage profit gain, followed by technology.
A large portion of cyclical names fall under the "value" label, and investors have watched the Russell 1000 value index close the gap on the Russell 1000 growth index following upbeat vaccine news.
With virus cases still rising, many strategists expect the bigger recovery to take place in the second half of the year.
"Most likely, second-half outlooks will move higher as corporations gain clarity and ultimately confidence," Lindsey Bell, chief investment strategist for Ally Invest, wrote in a report Friday.
Yet the uncertainty surrounding the recovery makes getting information from companies even more critical at this stage, even if it's not "formal" guidance, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
"That's important for a market anxious to turn the corner," after a tough year, she said.
(Reporting by Caroline Valetkevitch; additional reporting by Lewis Krauskopf; Editing by Alden Bentley, Cynthia Osterman and David Gregorio)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.