Wall St Week Ahead Profit-hungry investors amid worrying growth

NEW YORK, July 9 (Reuters) – Investors look to upcoming quarterly results for U.S. companies and recovery expectations in the second half of 2021, with some fearing the recent economic surge is already running out of steam.

US Treasuries rallied sharply this week amid fears of slowing economic growth in the second half of the year, pushing yields to levels not seen since February. In the stock market, there was a sell-off in financials, energy and other so-called recovery-related value stocks.

A massive second-quarter profit jump is expected to mark a spike for U.S. profit growth and recovery from last year’s pandemic-induced profit slump. Profits on the S&P 500 would have increased 65.8% from a year ago, according to IBES data from Refinitiv.

This is on track to be the strongest percentage growth since the fourth quarter of 2009 following the Great Financial Crisis, according to IBES data from Refinitiv.

As of Tuesday, earnings reports are due by JPMorgan Chase (JPM.N), Goldman Sachs (GS.N), Bank of America (BAC.N) and other major banks, kicking off of the quarterly earnings season. They could give early clues to the economy and growth-related stocks.

Most of the major US banks are expected to post a significant rebound in quarterly profits, even with declining trading income and a freeze on income due to low interest rates and weak demand. Read more

Investors are also eager to assess whether earnings will support the rise on Wall Street, with the S&P 500 (.SPX) up around 16% for the year so far. Many market watchers say the expected rise in profits this year is one of the main reasons for the strong performance of the market.

Still, this week’s weaker than expected report on US unemployment claims and the spread of the Delta coronavirus variant added to investor questions about the economic reopening.

“For this earnings season, what investors will want to see and what we expect is that the earnings trend on the value side is still intact, to support (opinion) it is too early to exit And that starts with the banks next week, ”said Keith Lerner, chief markets strategist at Truist Advisory Services.

Many investors, including Lerner, remained bullish on economically sensitive sectors like energy, financials and industrials that are seen as value deals due to years of underperformance. read more The S&P 500 Stock Index (.RLV) is down for the week. Over the same time period, the S&P 500 Growth Index (.RLG) – known to companies with bullish momentum behind them – is higher, reflecting a rise in tech stocks that has been aided by lower returns on stocks. 10-year benchmark bonds.

Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas, Texas, who loves energy, materials, restaurants and some retailers, said that while the picture isn’t perfect in all companies, the season for results should confirm the strength of the economy.

“It’s not 100% rosy,” he said, but “we expect earnings to be extremely strong, so we are bullish on the market.”

Among sectors, Industrials, Consumer Discretionary, Energy and Materials are expected to post the largest year-over-year earnings gains, with Industrials (.SPLRCI) estimated to be up more than 500 %, based on data from Refinitiv.

Second-quarter earnings estimates are probably still too low, wrote Nicholas Colas, co-founder of DataTrek Research, in a note this week.

As a result, estimates for 2021 overall and for 2022 “should continue to rise as we receive the second quarter financial reports,” and this could give investors more confidence that earnings should support the market from. next year, he wrote.

Also on the radar will be what companies do to pass on commodity price increases they might face, said Sameer Samana, senior global markets strategist at the Wells Fargo Investment Institute. Signs of these pressures have appeared in economic data in recent months.

Other companies due to report next week include Delta Air Lines (DAL.N), UnitedHealth Group (UNH.N) and Kansas City Southern.

Reporting by Caroline Valetkevitch; additional reporting by Lewis Krauskopf; Editing by Alden Bentley and David Gregorio

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