Breaking News
Black Friday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Earnings Rolls On With Solid J&J, Raytheon Results, Microsoft, Starbucks

By TD Ameritrade (JJ Kinahan)Stock MarketsJan 26, 2021 10:51AM ET
Earnings Rolls On With Solid J&J, Raytheon Results, Microsoft, Starbucks
By TD Ameritrade (JJ Kinahan)   |  Jan 26, 2021 10:51AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Trying to keep up with all the earnings news? It’s a challenge, but a welcome one for many investors anxious to see how Q4 turned out for the major companies.

The day begins with a fresh batch of earnings data but nothing new on the vaccine front. Johnson & Johnson (NYSE:JNJ) had really nice earnings and so did Raytheon (NYSE:RTN). Meanwhile, Microsoft (NASDAQ:MSFT), Texas Instruments (NASDAQ:TXN) and Starbucks (NASDAQ:SBUX) wait in the wings for after the close. There’s so much to look at today it’s hard to keep track of everything.

Some investors might have been hoping for a vaccine update from JNJ as part of its earnings today. Instead, the company promised results “soon.” With a lot of people worried about new virus variants and slower than expected ramp-up of vaccinations, any positive news on JNJ’s vaccine would probably be welcomed. Looks like we’ll have to wait a bit longer.

We won’t have to wait much longer for the latest Fed observations. They start their meeting today and Chairman Jerome Powell takes the podium tomorrow afternoon. There’s not much drama here. It would be shocking if the Fed said anything other than what it’s been saying about keeping things dovish so the economy can recover. It is the Fed, so you have to pay attention and, of course, consider listening for anything they say about possible inflation. Otherwise, it’s probably going to be like sitting through the same movie you just watched.

Yesterday, “risk-off” trading dominated. Bonds and volatility rose amid virus worries. Today, bonds stepped back just a bit, crude is holding steady, and markets in Europe rose overnight amid strong earnings over there. That, combined with the morning’s solid set of U.S. earnings reports, might explain the light pre-market gains for some of the major indices.

Toilet Paper And Canned Stew

On the first day of the biggest earnings week of the year, what rallied? Companies that make toilet paper, household cleaners, and canned beef stew. Kimberly Clark (NYSE:KMB), Clorox (NYSE:CLX) and Hormel Foods (HRL) partied like it was 2020 on Monday. At the same time, big-tech got some bids ahead of Microsoft (NASDAQ:MSFT) reporting later today and Apple (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) and Facebook (NASDAQ:FB) going tomorrow.

Basically, the market behaved like everyone would be staying home a while longer, with investors once again embracing the stocks that rocked when lockdowns first hit. Meanwhile, the airlines that had found some buyers last week got sent back to the hangar, with American Airlines (NASDAQ:AAL), Delta (NYSE:DAL, and United Airlines (NASDAQ:UAL) suffering sharp losses.

At the same time, bonds also received some new love, pushing the 10-year Treasury yield down to 1.03% by the end of the day after it touched 1.19% earlier this month. Right now, yields might remind you of a turtle that stuck its head out from under its shell, sniffed the air and then decided it was safer inside. The yield is at its lowest level since Jan. 6.

All this could mean there’s trepidation about the pandemic, especially with Europe facing more trouble and new strains in the U.K. and South Africa. Carnival (NYSE:CUK) (NYSE:CCL) pushed back cruises. Also, the Biden administration’s decision yesterday to suspend travel to the U.S. from some countries helped reinforce that we’re far from being out of the woods. The Cboe Volatility Index (VIX) climbed above 24 for a while yesterday after dropping below 22 at times last week, a possible sign of investors fearing more choppiness in the coming days.

The “risk-off” mood might have gained strength by having 20% of the S&P 500 reporting this week and slow progress on vaccinations here. The market’s had an incredible run and many analysts worry things have gotten a little bit priced for perfection. There’s also concern that the Biden administration’s stimulus package might be pushed back on the calendar or trimmed, as it continues to face resistance in Congress. This could have been a factor pressing on some of the cyclical sectors yesterday like Financials and Energy, research firm noted.

What Goes Up... Gamestop’s Wild Session

Also, when you observe action like we saw in GameStop (NYSE:GME) yesterday, you start to scratch your head a little. The stock more than doubled at one point and trading had to be halted several times for volatility. Like it or not, this is the type of stuff that makes veteran investors think back to the crazy days of 1999 and 2000. GME is up another 14% in pre-market trading.

It’s not too hard to find analysts who believe GME is trading far beyond its fundamentals, and there was talk that Monday’s move might have reflected a “short squeeze.” Sometimes a short squeeze is followed by more buying, which was apparently the case last year with TSLA. It can also indicate lots of people with deep pockets not necessarily investing in a stock, but trading it.

There’s nothing wrong with that, but if you’re a long-term investor it’s probably not a great idea to get too deeply involved in these moves. This is not normal activity, and you also have to be careful that when the music stops, so to speak—or when these buyers stop and it becomes like a game of musical chairs—that you’re not the one stuck without a chair and nowhere to turn to sell. The momentum that caused GME to go up can also be the momentum that causes it to go down, very quickly.

Caution is the watchword, for GME and many other stocks that have been making new highs. Earnings could be the time when companies need to offer proof that their high prices are justified by the fundamentals.

Looking ahead to this afternoon’s fundamentals, MSFT earnings could go a long way toward starting to tell the broader Tech story. Analysts expect the company’s commercial cloud segment to again be the main driver, with focus as always on Azure, MSFT’s main cloud platform. Azure sales grew 48% in the prior quarter, outrunning Wall Street’s estimates. We’ll see what sort of encore MSFT reports today.

Starbucks (NASDAQ:SBUX) is a big company reporting after the close that almost gets lost in the shuffle with so many behemoths on the calendar this week. Investors can listen to the SBUX call to get a sense of how the company’s been dealing with various state lockdowns and reopenings. They might also get word on whether its huge international business, especially in China, has started to reflect the bigger economic growth seen there recently.

Tomorrow morning get ready for some more big names, including Abbott Laboratories (NYSE:ABT) and Boeing (NYSE:BA). Boeing’s earnings will be the first for the company since the 737 MAX began flying again.

Tomorrow afternoon is the big showdown as TSLA, AAPL, and FB all come to the table after the close. Also, tomorrow brings the close of the Federal Open Market Committee (FOMC) meeting and the latest economic observations from Fed Chairman Jerome Powell. If you’re bored Wednesday afternoon, you can’t blame it on the market.

One thing Monday’s quick early reversal from the opening rally might remind people of is how important it is to look at the warning signs when they flash. Bonds and volatility were both higher along with stocks at the start of yesterday’s session. When you see that combination, it often means stocks are on a leash. Consider keeping an eye on 25 for the VIX and 1% for the 10-year Treasury yield. Penetration above that on VIX or below that on yield could be another warning sign to bullish stock market investors.

10-Year Treasury Yield Chart.
10-Year Treasury Yield Chart.

CHART OF THE DAY: BONDS SPOIL BANKS’ PARTY. The bond market has been climbing recently, taking the 10-year Treasury yield (TNX—candlestick) down to nearly three-week lows. Falling yields can take the starch out of the Financial sector (IXM—purple line), and that’s what apparently happened over the last few days. Data Sources: S&P Dow Jones Indices, CME Group (NASDAQ:CME). Chart source: The thinkorswim® platform from TD Ameritrade (NASDAQ:AMTD). For illustrative purposes only. Past performance does not guarantee future results.

Not A Bad Problem: Some companies have trouble generating cash flow. Others (very few) have the opposite problem: Too much cash. Apple (AAPL), which reports tomorrow, is part of that small crowd. The total cash trove stood at roughly $192 billion at the end of the company’s fiscal Q4. AAPL returned nearly $22 billion to shareholders in the form of buybacks and dividends.

Investors can expect to continue to see more of that ahead, according to Loup Ventures, which estimates an additional $73 billion will be returned in coming years.

“The challenge is that the company is generating so much net income that the road to net cash neutral is long and slow,” Loup Ventures wrote. “Apple has generated $57.4 billion in net income over the past four quarters and returned $90.2 billion in capital in a most tumultuous of years.

“At this pace, it will take the company two to three years to be net cash neutral,” the report added. “In the end, Apple has a good problem when it comes to cash—a gravy train of cash returning to investors, which is not fully appreciated.” Stay tuned.

Inflation on Doorstep? Did you hear that knock on the front door? One thing that could eventually show up is a little inflation, especially if there’s another big stimulus. As more money hits the system, at some point one would expect a bit of inflation. Maybe it will be more likely in the second half of the year if we get back to normal and people return to their offices and have other opportunities to spend. A lot of the country is still on lockdown and that means there’s only so much spending people can do. If you’re wondering about sector impact from possible inflation, it’s often thought that Consumer Staples and Utilities tend to do better in an inflationary environment. We’ll get a look this Friday at Personal Consumption Expenditure (PCE) prices for December. This report, which the Fed closely watches, showed a tepid 1.1% year-over-year rise in November.

Home Renovations: If new spending is driving prices higher and causing the recent manufacturing boom showing up in recent statistics, some of it might be happening in the home furnishings and appliances market. People stuck at home tend to spend on their homes, or at least it seems to be the case. It will be interesting to see if this theory gets more backing when Whirlpool (NYSE:WHR) reports this week and Home Depot (NYSE:HD) comes out later in the earnings season. Don’t forget Wayfair (NYSE:W), the online furniture retailer whose stock has kind of levelled off recently after that big surge in mid-2020. The company recently raised wages, not a bad sign at all. However, rising wages across more industries could also increase inflation concerns. So far, wage growth has been good but not great. Investors get an update on that early next month when the next payrolls data roll out.

Disclaimer: TD Ameritrade® commentary for educational purposes only. Member SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.

Earnings Rolls On With Solid J&J, Raytheon Results, Microsoft, Starbucks

Related Articles

Trading Point
Can Anything Stop The Stock Market? By Trading Point  - Nov 26, 2021

Stock markets have gone on an absolute rampage this year. The problem is that the factors that initially fueled this rally - heavy government spending and endless central bank...

Anna Coulling
Is This A Fake Move In U.S. Markets? By Anna Coulling - Nov 26, 2021 4

As US markets open in the midst of the Thanksgiving holiday season, it’s been a traumatic start to the end of the week, with all three indices trading sharply lower, with the Dow...

Earnings Rolls On With Solid J&J, Raytheon Results, Microsoft, Starbucks

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Woon soo Lee
Woon soo Lee Jan 31, 2021 3:47PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Recovery space for the next phase for this reason could have done it again
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email