US earnings Report

Stocks finished near session lows as investors paused at the month’s end to weigh big tech earnings. The Dow Jones Industrial Average () raced at 185 points, or 0.54% to 33,874, the S&P 500 declined 0.72%, and the Nasdaq steeped to 0.85%. For the week, both the Dow & Nasdaq slipped to 0.5% and 0.4% respectively while the S&P 500 remained flat. The market sentiment remained low as the U.S. government said it would bar most travel between the U.S. and India.

The benchmark 10-year Treasury yield saw the biggest monthly decline since July, as it lowered to 1.629% on Friday.

On an optimistic note, consumer spendings in the U.S. saw a gain of 4.2% in March as more stimulus checks flew across the country. The U.S. economy showed signs of a rebound track as traders turn their focus on corporate earnings. 

Top Stories This Week

Earnings Report- What’s Next for the Market?

Investors have backed away from technology, financial and communication stocks but anticipate the scenario as a barrage of earnings reports arrive this week. The Q1 earnings season so far has seen a record 87% of S&P 500 companies top estimates and earnings growth on average of 46%. 60% of the companies in the S&P 500 have reported Q1 results, with 86% beating analyst’ average EPS estimates. Strong earnings have improved valuations and revenues, with 78% of S&P 500 companies reporting revenues that beat the five-year average of 64%.

Investor’s Perspective:

Q1 2021 earnings have a glamorous outlook but the rally seems to fade in a few cases. Primary reason being, the Q1 earnings are compared against the first quarter of 2020, which was the initial time for the Covid-19 pandemic outbreak. Also, the first- quarter revenue got a boost from unprecedented monetary and fiscal stimulus, which might in-turn skew results due to rising government deficits and inflation. The next few months will show how Wall Street juggles between future earnings, revenues and interest rates as the current fog clears up.

Missed the Earnings Reports for Last week? Read here

What’s Challenging Tesla?

The popular Shanghai-based Electric carmaker NIO (NIO), reported its best quarter since 2018, beating analysts’ forecasts. The first quarter sales jumped more than fivefold to $1.23 billion and losses further narrowed down. NIO, along with Xpend and Li Auto, are the biggest competitors to Tesla, despite Tesla capturing most of the market share. NIO has aggressive expansion plans that have been hampered due to the current shortage of semiconductor chips. This has impacted the supply chain due to which the company faces challenges to meet the overall demand.

NIO, being a new entrant in the carmarking space, has already got a market value of US $63.8, more than Ford Motor’s overall capitalisation. This ensures that the EV maker stays under the spotlight for Investors. However, the target of 7,500 electric cars might seem too ambitious considering the lack of semiconductor stockpile. 

Investor’s Perspective

Tesla’s early production years might set an example for growth focused investors who have their radars fixed on NIO. Over the past year, NIO’s shares have provided a total return of 980.1%, high above the S&P 500’s total return of 43.3%. At Friday’s open, NIO shares were down 3% from Thursday’s closing but the stock closed at an increase of 2.2%. The growth persists despite the supply shortage as the company is now focused on taking advantage of the forced downtime by modifying production lines. 

A Change of Plans?

Honeywell (HON) announced its transfer to the Nasdaq Stock Market from the New York Stock Exchange, effective May 11. Once listed, the $155.5 Billion market cap company would land a spot among the top 20 of the Nasdaq 100. The aerospace, control technologies and performance materials company’s listing on Nasdaq comes as a blow to NYSE as HON just completes 100 years of trading on the big board. The switch will also make the company eligible for inclusion in the Nasdaq-100 index. 

Investor’s Perspective:

The surprise move comes as a symbolic one as the company now makes a shift in perception. The Nasdaq has always been a category defining index for the technology sector which aligns well with Honewell’s future aim of shaping the future of Technology and Sustainability. The overall impact on stock price is estimated to be minor as fund managers managing money indexed to the benchmark will now be buying Honeywell shares.

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