The last two weeks haven't exactly been ideal for the major US indices. Since the end of August, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 have been down 1.54%, 0.93%, and 0.51%, respectively. The decline in these indices is all the more striking as they have followed an impressive run of record highs and seemingly inexhaustible market bullishness.
In times like these, perhaps it is good to remind ourselves how far the indices have come in the year to date. If anything, reminiscing about the indices extraordinary gains in 2021 should help us contextualise the minor misfortune befalling stocks and indices in September.
It may also be appropriate to remember that September has never been a great time for stocks. One example frequently quoted is that Since 1945, the S&P 500 has closed lower 55% of the time during September. More recent history has been kinder to the index, recording a 25% loss rate in four September since 2016.
It may be too soon to call September 2021 for the bears. There is still time for the market to turn things around. As we ride out the rest of the month, let's revisit some of the most significant share price gainers of US-listed companies thus far in the year. Bear in mind; some stock price gains may be the result of steep losses the year before or other anomalies in the market.
aTyr Pharma shares have risen 60.8% in the past week after it reported positive results in a trial of its lung disease (pulmonary sarcoidosis) medication. The Californian based Biotherapeutics Company share price rise is even more impressive from the vantage of a month, up by 81.7% in this time frame.
Notable mentions; Uranium Energy (NYSEAMERICAN: UEC) up by 26.6%, Aloca (NYSE: AA) up by 13.0%, First Solar (NASDAQ: FSLR) up by 9.7%.
ESG investors will be disheartened to hear the Largest Gainer for the past 90 days has been Peabody Energy Corp. Peabody Energy is a 'coal producer', one of the largest in the world at that, with mining operations across the US and Australia. The Company has contracts to supply Coal to electricity generators, and steel manufactures around the globe.
Since August, the price of Coal has soared due to limited supply and improving demand from developing Asian nations. These factors led to improved finances for the Company, resulting in BTU rising by 83.6% since mid-June.
For interest sake, Coal is currently trading at $177.5 per metric ton, up from $40.40 per metric ton at the end of August.
Notable mentions: Chipotle Mexican Grill (NYSE: CMG) up by 37.6%, Advanced Micro Devices (NASDAQ: AMD) up by 29.9%, and Nvidia (NASDAQ: NVDA) up by 25.3%.
Perhaps this was an obvious choice for Largest Gainers since February 4 (the first trading day of 2021). AMC, up by 2,200%, after catching a second meme-stock wind. Its popularity as a short squeeze stock has risen to be perhaps equal to that of GameStop (NYSE: GME). It is arguably so because it is "cheaper" per stock and owning one whole AMC stock feels more satisfying than owning one-fourth of a GME.
Speaking of which, the only stock that could give AMC a run for its money is GameStop. Up by ~1,000%) YTD, GME has battled its way up to from US $17.25 to, as of writing, US $204.5 per share.
Notable mentions: Veritiv (NYSE: VRTV) up by 329.1%, Dillard (NYSE: DDS) up by 250.5%, Macy's (NYSE: M) up by 89.9%.
Last weeks' turbulent market is about to head into another. The intensity of the upcoming turbulence will depend on how these household names have performed in Q2 as per their earning reports. Whether they have performed poorly, in line with expectation, or extraordinarily well, the market will have a strong opinion and a possibly strong reaction.
Last week started with investor jitters taking the SPX500 and NAS100 down, a non-insignificant amount, for a third straight day (and the US30 down for the second straight day). The apparent cause of the Jitters? The spread of the Delta variant of the Coronavirus picks up in Europe and APAC countries (South Korea, Thailand, Vietnam, and Australia in particular).
By Tuesday, the jitters had subsided, and investors ploughed back into the market. The SPX erased Monday losses, while the NAS100 was up by 50 points over Monday's open. By the close of the market on Friday, all three major indices were at record highs.
At the time of writing, DOW JONES E-MINI FUTURES, NASDAQ-100 E-MINI FUTURES, and E-Mini S&P 500 are all flat, half a day out from the US markets opening.
This week is the busiest Q2 earning reports week of the year. As such, this article will be broken up into several parts.
Companies that are worlds apart are reporting Monday. The $105B defence contractor, Lockheed Martin (NYSE: LMT) and the $13B toymaker, Hasbro (NASDAQ: HAS), are first to the batting plate.
Hasbro is forecasting annual growth in sales of 10% for the next two years as it expands its gaming portfolio. In response, analysts have HAS projected to reach a price 24% above the current stock. Unfortunately, 2021 Q2's earnings are anticipated to be down compared to Q1. However, it is good to note that the toymaker has been reporting at the top end of its estimates in the past three quarters, with last quarter beating expectations by an impressive 55%.
Lockheed Martin is expected to report earnings per share of $6.53, up by 13% over the PCP. Overall sales are forecast to have lifted to $16.9B, up by 4.5% over the PCP. A steady flow of high-value government contracts has kept Lockheed's out of any trouble all 2020 and 2021. The Company currently has an order backlog worth $150B.
Lockheed and Hasbro will both be presenting their results before the market opens on Monday.
Tesla Inc (NASDAQ: TSLA) will be reporting after the bell on Monday. Even as it beat its earnings per share estimates, the EV manufacturer has disappointed investors in its previous two quarters. For example, TSLA has lost 11% since its last report three months ago. Tesla is again expected to beat its estimates in Q2 2021. The third consecutive earnings beat might be enough to reverse the sell-off the Company has experienced in 2021.
I will omit comment on every Company in this article. Instead, separate pieces will be devised for each day of this week so that the information does not become overwhelming. For now, take note of the following lists and what days companies on your watchlist are reporting their earnings.
The S&P500 (SPX) accomplished a historic milestone last week. For the first time in its 64-year history, the Index recorded seven straight record level closes. The Index closed on Friday 02/07/21 at 4352.34, up by 0.75% for the day, up by 1.59% for the week, and up by 2.02% for the seven record-setting days.
Events bookending the Index’s growth over this timeframe were Congress passing a US$1.5 trillion infrastructure spending bill and a robust Nonfarm Payroll report.
Setting off the SPX’s record run was the announcement on 24 June that the Biden Administration had struck a deal to pass a sizable bipartisan Infrastructure bill. By the opening of the market on 25 June, The SPX was trading 0.58% higher. Naturally, the SPX is, in part, comprised of the most significant US construction, utility, and manufacturing Companies. These companies will likely benefit from the Government’s heavy (and overdue) investment in the country’s infrastructure. Companies such as Fortinet Inc (NASDAQ: FTNT) and Qualcomm Inc (NASDAQ: QCOM), who will be integral in building out the country’s digital infrastructure, were some of the big gainers over these seven days, up by 3.4% and 1.9%, respectively.
It might be best to keep a keen eye on news regarding additional government spending in this area. The Biden Administration has already indicated that they want more infrastructure spending and are aggressively pursuing this line.
The Nonfarm Payroll report, released on Friday (2 July), beat expectations by 150K. In total, 850K jobs were added to the US economy, against an expectation of 690K. By the end of the Friday session, the Index was up by 32.4 points, accounting for half of the week’s gains.
SPX futures are trading slightly lower on Monday, indicating that Friday’s jubilance might be weakening before the start of the US trading week. The Futures have plenty of time to reverse as the US markets are closed on Monday due to the observance of the country’s national holiday, Independence Day.
YTD, the Index is up 17.6%. Quickly browsing the Index’s historical growth data, double-digit figures close to 20% are not all that uncommon. Taking the previous five years as an example, starting from 2020, the Index grew 16.3%, 28.9%, -6.2%, 19.4%, and 9.5%.
If we want to make history as a predictor of the future, we could note that the SPX has never closed lower for the year after logging double-digit growth in the first half of the year. However, this fact is unrelated to the probability that the SPX could be lower than its half-year position by the close of the year.
At least in the short term, I would expect the jubilance in the market to continue. The Index is startlingly close to crossing the 4350.00 level. Perhaps it will achieve this feat sometime this week. Further afield, 4360.00 and 4400.00 are some barriers for the Index to travel in the immediate term.
If we want to be a little more pessimistic, we could look at some retracement points for the Index. The 50% Level appears to be an obvious point of retracement, although the resistance at this point would have to switch to support. A more appropriate level for retracement might be in the middle of the 61.8% and 100% levels. At this point, approximately 4191.00, there exists a historical story of support.