Another muted session for the US stock market seen yesterday as the market participants wait for new catalysts to drive the main US stock indices to another fresh all-time highs. The S&P 500 and Nasdaq 100 recorded minor gains of +0.15% to 4,079 and +0.28% to 13,616 respectively while the Dow Jones Industrial Average was almost unchanged at 33,446.
Small-cap stocks underperformed where the Russell 2000 declined by -1.60% to 2,223; its second consecutive session of losses and it closed below its 50-day moving average at 2231. From a technical analysis perspective; the major uptrend phase of Russell 2000 in place since 18 March 2020 low of 966 is at risk of staging a correction as its price action has formed an impending bearish reversal “Head and Shoulders” configuration in place since the recent 10 February swing high with its neckline support coming in at 2085/65.
In addition, market breadth was neutral with the number of declining stocks listed on the NYSE and Nasdaq outpaced advancing stocks by a ratio of 1.28 and 2.15 respectively. Mix performances on the S&P Sectors; 5 of 11 sectors in the green with outperformances seen in Communication Services (+0.72%), Information Technology (+0.54%), and two cyclicals/value plays; Energy (+0.44%) with Financials (+0.41%). In contrast, Industrials and Materials underperformed with losses of -0.44% and -1.75% respectively.
Fed FOMC minutes from the recent March 16-17 meeting was a non-event news flow as it reiterated the same rhetoric that key Fed officials had made in public speeches in the past few weeks that the US economy was would likely to take some more time to reach Fed’s maximum employment and price stability goals, hence the current accommodative monetary policy stance will remain appropriate for now.
The new potential catalyst to trigger significant movements for US and global stock markets will be the upcoming Q1 2021 US earnings season that kick-starts next week on 14 April with various major US financial institutions reporting their respective numbers: Goldman Sachs, JPMorgan Chase and Wells Fargo. Overall, the S&P 500 bottomed-up earnings per share (EPS) estimate has increased to a record high by 6% from $39.86 from $37.61, the largest increase in EPS estimate for a quarter since Q2 2002 according to data from FactSet. The previous record was an increase of 5.4% in Q1 2018 after the tax reform was passed. In addition, both the S&P Energy and Financials sectors recorded their largest increase in bottom-up EPS estimate for Q1 2021 at 123.4% and 13.1% respectively.
Chart of the day – S&P Sectors
S&P Sectors Change in Q1 2021 earnings estimatesSource: FactSet