Stock futures pointed to a sharply higher open Monday morning, with the three major indexes looking to kick off May on a high note.
Contracts on the S&P 500 added about 0.5%. On Friday, the index ended lower, but still closed out its best month since November with a monthly advance of more than 5%. In April, the communication services and consumer discretionary sectors led gains in the S&P 500, returning to a leadership position after lagging earlier in 2021 amid a rotation into cyclical and “reopening” stocks. However, growth names pared some gains last week, with Federal Reserve Chair Jerome Powell highlighting that some asset valuations appeared “frothy.”
Still, a wave of stronger-than-expected earnings results from companies across industries helped fuel the latest move higher in the broader market, with corporate profits rebounding alongside the pick-up in economic activity. As of Friday, 86% of S&P 500 companies had beaten first-quarter earnings expectations, according to FactSet data. This would mark the highest proportion since at least 2008, if it holds through the end of first-quarter earnings season. Companies including Uber (UBER), Lyft (LYFT), Square (SQ), Peloton (PTON) and Pfizer (PFE) are poised to report results later this week.
Underpinning the economic recovery has been the strong pace of vaccinations in the U.S., which has in turn enabled more business across the country to reopen and bolstered consumers’ confidence in a return to a semblance of normalcy. As of Sunday, more than 104 million Americans were fully vaccinated, according to data from the Centers for Disease Control and Prevention, to comprise nearly one-third of the country’s total population.
However, some strategists cautioned investors about getting complacent, with the ample good news on the recovery now well priced into the markets.
“I think the market is priced almost to perfection, right? We’ve priced in a good vaccine rollout. We’ve priced in a strong reopening to the economy. I’m a little concerned about the second half of the year,” Allan Boomer, Momentum Advisors Chief Investment Officer, told Yahoo Finance. “I think it’s possible that in the short term, earnings have basically peaked and … this is a great quarter, but I don’t know that the rest of the year will be quite as strong.”
“One of the things that I think you’ll start to see is that we’ve got a labor shortage in the United States. We talk about the jobs that were lost. We don’t really talk about the fact that there’s a lot of companies that have a lot of vacancies that are outstanding,” he added. “So I think you’ll start to see in the second half particularly companies that rely on labor, you’ll start to see some issues around a labor shortage for sure.”
The Labor Department will release its April jobs report on Friday, which is expected to show a staggering nearly 1 million payrolls came back last month, accelerating from March’s gain.
8:00 a.m. ET: ‘Capex, R&D and M&A will account for a majority of corporate cash spending in 2021’: Goldman Sachs
With uncertainty from the pandemic lifting, corporations have begun to announce ambitious new strategies, many of which involve massive investments into their future growth. According to Goldman Sachs U.S. chief market strategist David Kostin, this spending will be primarily funneled into one of three key areas.
“Capex, R&D and M&A will account for a majority of corporate cash spend,” Kostin wrote in a note Monday morning. “Many firms have used 1Q reporting season to announce substantial new growth initiatives. U.S. spending plans by AAPL ($430 billion over 5 years), and capex boosts by INTC ($20 billion) and WMT ($14 billion) are notable examples.”
“We forecast a +19% rebound in cash use in 2021 and +6% growth in 2022,” he added. “Tax represents a ey risk to the trajectory of cash spending in 2022 and beyond.”
7:27 a.m. ET Monday: Stock futures point to a higher open
Here’s where markets were trading before the opening bell Monday morning:
S&P 500 futures (ES=F): 4,194.75, up 20.25 points or 0.49%
Dow futures (YM=F): 33,967.00, up 200 points or 0.59%
Nasdaq futures (NQ=F): 13,884.00, up 34.25 points or 0.25%
Crude (CL=F): +$0.08 (+0.13%) to $63.66 a barrel
Gold (GC=F): +$10.80 (+0.61%) to $1,778.50 per ounce
10-year Treasury (^TNX): +1.3 bps to yield 1.644%
NEW YORK, NEW YORK – APRIL 15: People walk by the New York Stock Exchange on April 15, 2021 in New York City. After major companies reported strong earnings and new economic data points to a rebound in consumer spending, U.S. stocks climbed to record levels on Thursday. (Photo by Spencer Platt/Getty Images)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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