Market Summary
1.9%S&P 500
All three indexes posted weekly losses for the first time in four weeks. The S&P 500 fell about 1.0%, and the NASDAQ declined 1.9%.
Q2 earnings season is off and running with 6% of the S&P 500 having reported thus far. 90% of those companies beat estimates by an aggregate surprise of 28%.
Inflation surprise
5.4%June CPI
June’s jump in consumer prices was the biggest year-over-year increase for any month since 2008, with the index jumping 5.4%. While higher numbers suggest that inflation may be here to last for longer than many expected, a closer look shows that the materials that drove the increase are likely transitory, with used cars and trucks responsible for one-third of the surge.
Delta Jump
70.0%Surge
New U.S. COVID cases surged 70% week over week to an average of 30,000 new infections a day, fueled by the Delta variant. Deaths rose 26%, spurring the U.S. Government to revive a stalled vaccination campaign with reports suggesting that 97% of those hospitalized with the new Delta variant are unvaccinated.
Equities
5.1%Russell 2000
After a brief respite due to strong market rotation dynamics, the narrow breadth of the S&P 500 is back in focus. The S&P 500 is up 4% since June 3rd, but ~80% of that move can be attributed to just the largest 5 stocks.
Small-cap equities (Russell 2000) fell 5% this week, adding to a month of underperformance relative to their large-cap counterparts.
Moderna was the big stock mover of the week. The Biotech company surged after it got the news it’s being added to the S&P 500.
Stock Watch
Netflix
Netflix reports on Tuesday and is arguable the one to watch. With its EPS more than doubling last quarter, much of the same is expected on the earnings front. Still, the languishing subscriber growth continues to worry investors as competitors continue to threaten its market share.
While much slower subscriber growth is understandable when compared to the unsustainable ‘pandemic fueled’ growth of 2020. Given the bullish premium already attached to the stock, Investors will be expecting positive growth figures to justify the current Forward Price/Earnings ratio of 51, especially when the industry average is 14.
Market Outlook
Tomorrow, Jeff Bezos jets off on an 11-minute trip to space, but our focus will remain firmly on the ground as a record-breaking earnings season is set to unfold.
This week’s packed slat of earnings reports includes Netflix, Coca-Cola, IBM, Twitter, Snap, Intel and J&J.
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