All of the major US stock indices with the exception of Nasdaq 100 have started the dreaded month of May on a positive footing; the S&P 500 gained by +0.27% to 4,192, Dow Jones Industrial Average outperformed with a rally of +0.70% to 34,113 and the small-cap Russell 2000 rallied by +0.49% to 2,277.
The Nasdaq 100 underperformed with loss of-0.44% to 13,799, dragged down by Amazon (-2.33%), Facebook (-0.77%) and Tesla (-3.46%). From a technical analysis perspective, 14,040 remains a key intermediate resistance for the Nasdaq 100 after failing to clear a bullish break above it on 16, 27 and 29 April.
Cyclicals/value stocks outperformed in the US session yesterday based on the performances of the 11 S&P sectors where solid gains were seen in Energy +2.91%, Materials +1.53% and Industrials +1.03% together with Healthcare +1.17%. Interestingly, the Energy sector has posted its best weekly return of +3.89% for the week of 26 April since 1 March that indicates a potential revival of medium-term upside momentum in line with higher oil prices. The WTI crude futures has staged a rally of +6.7% from its April low of $60.61 per barrel to yesterday’s US session close of $64.49 per barrel that managed to override the risk of a global economic downturn that can be triggered by a rise in COVID 19 infection cases in India caused by a new variant strain
Positive Q1 US earnings so far based on data compiled by FactSet as at 30 April, with 60% of the companies in the S&P 500 have reported their actual results, 86% of these reported companies have announced a positive earnings per share (EPS) surprise and 78% of these reported companies reported a positive revenue surprise. If 86% is the final number, it will mark the highest percentage of positive EPS surprise for the companies in the S&P 500 since 2008.
Among the 11 S&P sectors; Consumer Discretionary and Energy saw the highest Q1 earnings surprise at 59.2% and 35.2 % respectively. In addition, so far 30 S&P 500 companies have issued positive EPS guidance for Q2 2021 while 18 companies issued negative EPS guidance Hence, the current percentage of companies that have issued positive EPS guidance stands at 63% (30 out of 48) which is above the 5-year average of 35%.
On the economic data front, US ISM manufacturing PMI for April grew at a slower pace at 60.7 from 64.7 in March, also below consensus estimate of 65.0. The manufacturing prices component (input costs for manufactures) shot up to 89.6, the highest level since 2008 from 85.6 recorded in March, above consensus estimate of 86.1. Hence, the risk has indeed increased for higher inflationary pressure to be passed down to consumer in the second half of 2021.
Two key Asian stock markets; Japan and China remain closed today till Wednesday for public holidays. Mostly positive performances seen so far at this time of the writing on key benchmark Asian stock indices; Hong Kong’s Hang Seng Index +0.23%, Hang Seng TECH Index +0.40%, South Korea’s KOSPI 200 -0.20%, Australia’s ASX 200 +0.28%, Singapore’s Strait Times Index -0.21%.