Markets Await Better Than Expected Earnings Season

Markets still hope for an the earnings season that is better than expectations. Robust support is seen with a stronger labour market. The US economy is in great shape from that perspective. Equity markets are expected to rebound. Markets are also looking for them to go back up toward their highs of 4,800 over the few months, especially as they get more clarity from the Fed. As we all know, equity markets do not like uncertainty.

Tesla, the company formerly known as “Square” and blockchain company Blockstream are reportedly working together on a plan to mine bitcoin in Texas with solar power. Based on the report, the renewable energy-only project would use solar and storage energy from Tesla, and would include publicly accessible metrics of power output and bitcoin mined.

First-quarter corporate earnings season is set to kick off in earnest next week with a host of major financial institutions including JPMorgan, Morgan Stanley and Goldman Sachs reporting results. According to a number of analysts, companies’ profit margins will be the key factor to watch for investors looking to appraise which firms are effectively navigating in the face of inflation.

Shares of Peloton (PTON) briefly rose as much as 2% Friday morning after Morgan Stanley analysts said they expected the connected fitness company to exceed guidance on subscriber growth for the current quarter. However, the stock soon erased gains, and was trading lower by about 1% mid-morning.

Morgan Stanley expects the company’s fiscal third-quarter connected fitness subscriber counts will top 3 million. Earlier this year, Peloton said it expected to post third-quarter subscribers of 2.93 million, before having these rise to 3 million at the end of the fiscal year.

Peloton added more new users than previously anticipated. Morgan Stanley rates Peloton as equal-weight, with a price target of $32 per share.

Some investors are looking for bargains in beaten-down growth and tech stocks, betting they will shine as the Fed fights to slow the US economy and tame hot inflation.

Growth stocks have borne the brunt of the Fed’s hawkish turn this year, with the Russell 1000 Growth index down more than 11% year-to-date, compared to a more-than 5% loss for the benchmark S&P 500 index. By contrast, value stocks are broadly flat on the year.

Underpinning those moves is the perception that the Fed’s fight against inflation will keep interest rates climbing, eroding the future cash flows that growth stocks are heavily valued on. Value stocks, meanwhile, have found support from a strong economy and surging commodity prices.

Expectations of an aggressive Fed briefly turned the spread between yields on two and 10-year Treasuries negative last week, a phenomenon that is often seen as an indication of worries about economic growth. Recessions have followed six of the last seven yield curve inversions since 1978.

Earnings season kicks off next week, giving investors a closer look at how companies have fared at a time of heightened geopolitical uncertainty and rising commodity prices. Also on tap is the latest US consumer prices report, due out on Tuesday. The S&P 500 (.SPX) is on track to close down 1% this week, as worries over a more aggressive Fed slow a rally that saw the index pare its year-to-date losses last month.

Overall, investors have sent a net $4.2 billion to the Invesco QQQ Trust – which tracks the growth-heavy Nasdaq 100 Index – over the last three weeks, the fund’s longest streak of positive inflows since January, Lipper data showed. Some on Wall Street are skeptical of a bounce in growth stocks, especially as bond yields continue soaring. Yields on the US benchmark 10-year Treasury recently hit 2.71%, their highest level since 2019.