US stocks open modestly higher after last week’s strong rally

• European markets firmly higher in midday trading with the United Kingdom outperforming after lagging last week.
• Asian stocks mostly higher as Japan’s Nikkei 225 surges overnight.

What a week

• The S&P 500 Index gained more than 4%, for the best week since after the election, while it also was green all 5 days and finished Friday at an all-time high.
• Since 2010, there have been 16 other weeks to gain at least 4% and two months later the S&P 500 was higher 13 of those with an average return of 4.1%.

Earnings season impresses even the optimists

• S&P 500 Index earnings growth for Q4 is tracking nearly 2% above year-ago levels on more than 11 percentage points of upside.
• S&P 500 revenue is on track to grow nearly 3% year over year on roughly 2.5 percentage points of upside.
• Forward 12 months’ estimates have increased by an unusually strong 3.6% since January 1.
• We have raised our 2021 forecast for S&P 500 earnings per share from $165 to $170 and believe higher earnings expectations support further gains for stocks in 2021.

Technical update

• Market momentum from last week continues this morning with benchmark indexes higher.
• The S&P 500’s clearance of the January highs sets up 4100 as the next potential target.
• The 10-year Treasury yield has also broken out higher, toughing 1.19% for the first time since March 2020.

Week ahead

This week’s economic calendar includes:

• Tuesday: National Federation of Independent Business (NFIB) Small Business Index (Jan.) and the US Bureau of Labor December Job Opening and Labor Turnover Survey (JOLTS) (Dec.).
• Wednesday: Consumer Price Index (CPI) (Jan.), labor statistics (Jan.), wholesale inventories (Dec.), and the Treasury Budget (Jan.).
• Thursday: Weekly initial unemployment
• Friday: University of Michigan sentiment (Feb.).

COVID-19 news

• The United States reported 96,000 new COVID-19 cases on Sunday, the first day below 100k since November 3, 2020 (source: COVID Tracking Project).
• New cases extend their streak of consecutive week over week declines to 27.

Street View Video Delivers A Message In A Bottle

LPL Research Chief Investment Officer Burt White contends there is one metric above all others that may tell us how well the economy is doing in the new Street View “Message In A Bottle”.

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