Stocks keep climbing as earnings parade rolls on
The market continues to rally. All eyes are on Corporate America. More banks will release earnings this week. And now it's time for Wall Street darlings Netflix and Tesla to step up to the plate.
Another day, another market rally. (Condolences to investors in Disney, Ford, Verizon and Ma Bell for missing out. Oof!) But will the bull run continue for the remainder of this week…and beyond? That will largely depend on how good corporate earnings are.
Big banks have kicked off “earnings season” with pretty solid results. And investors are hoping to hear more good news this week from the likes of Bank of America, PNC, Charles Schwab, Morgan Stanley, Goldman Sachs, Capital One, American Express and other major financial firms.
But this week’s earnings calendar broadens out quite a bit. Also on tap? Novartis, Lockheed Martin, Netflix, Tesla, IBM, J&J, Taiwan Semi and SAP. Just to name a few.
Keep a particularly close eye on Netflix and Tesla. Both stocks have soared this year thanks in part to an explosive rally for tech and other momentum plays. Will Netflix and Tesla be able to live up to the considerable hype? Investors are expecting strong earnings and revenue (and in the case of Netflix, decent subscriber growth.)
Both companies could benefit from the woes of some of their main rivals right now. Disney appears to be a mess. The House of Mouse’s stock is now down for the year and hovering near a 52-week low amidst reports that Bob Iger, who just extended his contract to remain as CEO through 2026, may be looking to sell assets.
Ford tumbled after announcing price cuts for its electric F-150 Lightning truck. That could be in part due to tough competition for Tesla. And while consumers benefit from and love to see price wars, investors aren’t fond of what lower prices say about demand and the impact they have on profit margins.
Some investors are also starting to worry about inflation eating into consumer demand. And the Federal Reserve is expected to raise interest rates again next week after a brief pause. That could help finally choke off inflation…but at the expense of decent economic growth. At some point, earnings may suffer. And it may be tougher to justify the market trading at such lofty levels for much longer if Corporate America isn’t able to keep posting strong results.
That’s why earnings from Netflix and Tesla (and others outside of the financial services sector) are so important. Good numbers from them could help keep this market rally going. But poor numbers (or even worse, disappointing outlooks) could put the bull into hibernation.