Market Update – 5/3/21

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ashu013sharma | PxHere

U.S. stocks experienced a relatively stable week from April 26 to May 3 as investors continued to snub positive economic data.

The Dow Jones Industrial Average increased by 0.4% from April 26 to May 3, and the S&P 500 posted gains of 0.1% during the same time period. However, the NASDAQ Composite dropped due to lackluster earnings from companies such as Facebook Inc. and Netflix Inc., with an overall decrease of 1.7%

This relatively neutral week where neither the Dow Jones nor S&P 500 moved a great deal comes amid more positive economic data showing that the United States is continuing to recover, being framed against the backdrop of continuing spread of COVID-19 in other parts of the world.

U.S. household incomes rose at a staggering 21.1% in the month of March, which has been recorded as the largest monthly increase since 1959. This huge increase came as a result of the 1400$ stimulus checks that were included in the $1.9 trillion relief package passed in March.

This is also reflected in the growth of disposable personal income, which grew an estimated $4.18 trillion, or 23.6%, which is nearly identical to the growth in personal income.

Companies have continued to beat analyst expectations as earnings season is underway.

Out of all of the companies within the S&P 500 that have reported earnings as of April 30, 87% of them have beat profit expectations, according to Refinitiv. This is far above the historical average of 65%.

While this seems like good news, investors believe that the earnings have already been priced into current stock prices.

This sentiment has been echoed in the market as numerous companies have outperformed expectations and posted little to no gains.

Among these companies is Exxon Mobil Corp., which fell 2% on April 30 after posting earnings that demonstrated a return to profitability and a sooner than expected recovery from the pandemic.

“That recovery, which we had anticipated happening at some point in time, is happening sooner than we anticipated,” Exxon Chief Executive Darren Woods Investors said. Investors weren’t swayed though, even with positive guidance from Exxon’s management.

This negativity toward what should be a market with bullish outlooks is expected to continue as long as expectations continue to be set so high.

Many investors believe that now is a time of “peak growth” and to expect more “modest” gains from stocks going into the second half of the year, according to The Wall Street Journal.