Daily Insights

The S&P 500 Index opens firmly higher to begin a busy week of earnings; over 100 S&P 500 companies set to report:

• European markets stronger in midday trading
• Asian markets surge overnight with Korea, Hong Kong and Taiwan each up over 2%
• Silver up over 10% as retail trading frenzy turns its sight on metal ETFs

Big earnings upside, less than 40% of S&P 500 companies have reported.

• S&P 500 earnings for the fourth quarter are tracking an impressive 9 percentage points ahead of expectations.
• With less than 40% of S&P 500 companies’ results in, positive earnings growth for the quarter is a possibility.
• Forward 12 months’ estimates have increased by an unusually strong 2.7% since January 1, 2021.

So goes January. The S&P 500 Index fell 1.1% in January, opening the door to the historically weak February. There’s an old saying on Wall Street that goes, “As goes January, goes the year.” Implying a weak January could bring trouble. In fact, when January has been lower, the final 11 months are higher only 61% of the time, versus 89% if higher in January. We will take a closer look at this later today on the LPL Research blog.

Technical update

The S&P 500 suffered its worst weekly loss since late October last week, falling 3.3% and closing at 3714. The move below support from the January 15 lows sets up 3540-3630 as the next range of tactical support. The percent of stocks in the S&P 500 above their 50-day moving averages fell to 42%, the lowest since late October, but still short of oversold.

Week ahead. This week’s events include:

• Monday: Markit Purchasing Manager’s Index (PMI)(Jan.), construction spending (Dec.), and the Institute for Supply Management (ISM) Manufacturing Index.
• Wednesday: Vehicle sales (Jan.), ADP Employment Survey (Jan.), ISM services and composite PMIs (Jan.), and Markit’s composite PMI (Jan.).
• Thursday: Weekly initial unemployment claims, durable and factory orders (Dec.), and labor costs and productivity (Q4 2020).
• Friday: Non-farm payrolls, hourly earnings, average workweek, and unemployment (Jan.), and trade balance (Dec.).
• In addition, 110 S&P 500 companies will report fourth quarter 2020 earnings results.

COVID-19 news

The United States reported 118,000 new COVID-19 cases yesterday, the lowest daily increase in cases since the beginning of November (source: COVID Tracking Project).

• 7-day average of new cases dips below 150,000 for the first time since November 15.
• The US is now doing more than 1.5 million vaccinations per day as health experts push for greater implementation amid risks from new virus mutations (source: Johns Hopkins).

Positive Trends Send Strong Signals

This week’s Market Signals podcast discusses why positive COVID-19 news, solid small caps performance, high stock valuations, and more positive data trends are sending strong signals for 2021. Watch Market Signals: Positive Trends Send Strong Signals for 2021.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data are from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

For Public Use – Tracking # 1-05105916