Wed. Oct 27th, 2021

As earnings grow, so do stock prices.

This rather obvious information is confirmed in this chart which shows how, with a three-quarter lag, corporate earnings are more or less tracked by stock prices. This is another way of saying that the stock market has done a pretty good job discounting future profits.

So while companies have been crushing it during the second quarter (85% of S&P 500 companies have surpassed earnings estimates as of Monday), the question with which markets really pose is what the color outlook is. pink for 2022.

Tobias Levkovich, Citi’s top U.S. equity strategist, says there’s an almost “palpable” feeling that every 1% drop is a buying opportunity. “We’re less convinced,” he said. “Fund managers fully agree that the rate of profit expansion will be reduced, but most fear more positive and relative performance issues than a double-digit decline at the moment, but prefer a higher quality slope to portfolios.” .

It can’t last forever, right? Levkovich remains with its year-end price target of 4,000 for the S&P 500, which means he believes the market could go down 10%. And he has a specific month in mind when, if not, it will collapse, at least it will sink. “The lack of immediate catalysts for a setback is regularly cited, although we are concerned about higher taxes, cost pressures that reduce profitability, decline and more persistent inflation that coincides with September (usually the most seasonal month of the S&P 500), ”he said. .

There is evidence of all of its concerns in recent days as Congress debates how to fund infrastructure spending, Clorox CLX,
-9.46%
joined other consumer core businesses warning that inflation was affecting demand and its own costs, and Fed Gov. Christopher Waller said the slowdown could begin as early as October.

The buzz

It is a great day in the economic field, with the ADP employment survey and the services index of the Institute of Supply Management, and a speech by Fed Vice President Richard Clarida on the ‘economy.

Pfizer PFE,
+ 3.91%,
which rose nearly 4% on Tuesday to a 52-week high, will be in the spotlight for a report on the coronavirus vaccine he does with BioNTech BNTX,
+ 3.41%
could get full approval from the Food and Drug Administration before Labor Day.

Activision Blizzard ATVI,
-3.54%
gathered 7% in after-hours trading as the video game maker, harassed by allegations of employee harassment, exceeded earnings estimates. Dating website operator Match MTCH,
-1.78%
estimates of lost profits as key markets in India, South Korea, Brazil and Japan were said to be behind the COVID recovery curve.

Revenue is due to companies like General Motors GM,
+ 1.49%,
Kraft Heinz KHC,
+ 0.93%,
and after closing, Etsy ETSY,
+ 0.83%
and Electronic Arts EA,
-2.99%.

Robinhood Markets HOOD,
+ 24.20%
it will continue to be the focus, in the remarkable turn of the online broker after its disappointing initial public offering.

Zymergen ZY,
+ 2.35%
it collapsed 68% as the synthetic biology company that went public in April said its key product is in trouble and its CEO is leaving.

The markets

US stock futures ES00,
-0.16%

NQ00,
-0.04%
were constant after the 42nd record close of 2021 for the S&P 500 SPX,
+ 0.82%.
The performance of the Treasury TMUBMUSD10Y at 10 years,
1,158%
it was 1.18%.

Random readings

President Barack Obama reduces the celebration of his 60th birthday after criticism.

The U.S. returns tens of thousands of looted artifacts to Iraq.

There is a shooting star in our own galaxy.

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