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Visibility picking up

February 05, 2021

Graph depicting consensus earnings per share estimates for the S&P 500

Source: FactSet

Fourth quarter earnings season hits the halfway mark yesterday with a couple of key themes already well entrenched. First, it is now apparent that 2020 did not end with quite the thud that was anticipated just a few months ago, as both earnings and revenues are coming in well ahead of consensus expectations. The more important trend, however, is the clear improvement in visibility. Several firms that withdrew guidance in 2020 have re-established official forecasts this quarter. Moreover, some of the most constructive pre-announcements have come from the more economically sensitive corners of the market. GE, 3M, and Raytheon, for example, all resumed guidance this quarter and all three issued numbers at or above the prevailing consensus. Even some bellwether firms that have refrained from providing official estimates, such as Caterpillar, have indicated in more qualitative terms that they expect improving sales figures as early as this quarter. Forecasts for the market more broadly for both 2021 and 2022 are moving up as a result in another indication that the downside risks, while far from extinguished, are quickly receding.

Jobless claims fall

Along these same lines, new claims for unemployment insurance have now fallen for three straight weeks with a cumulative decline of 148,000 over that time frame. The four-week moving average has started to move lower again, as well. This improvement, not coincidentally, mirrors the drop in the new COVID case count and jibes with other indicators suggesting that the soft patch in the labor market is coming to an end.

Daily Trivia

What did the U.S. Commerce Department cite as its “Achievement of the Century” in 1999?

Previous Question

What original Dow Jones Industrial Average component was removed twice in the late 19th and early 20th century before beginning a 110-year run in the index in 1907?


General Electric


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