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U.S. Stock ETFs Get Ready for Earnings Season

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U.S. markets and stock ETFs jumped Monday as investors looked to the upcoming corporate earnings season and to progress in a coronavirus vaccine.

On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 1.7%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 2.1%, and SPDR S&P 500 ETF (NYSEArca: SPY) gained 1.6%.

German biotech firm BioNTech (BNTX) and Pfizer Inc (PFE) rallied as two of their experimental Covid-19 vaccines received the U.S. FDA’s “fast track” designation, Reuters reports.

“It’s selective optimism as we enter earnings season, chasing the same stocks that have been strong and looking forward to earnings as the market continues to have a narrow focus,” Andre Bakhos, managing director at New Vines Capital LLC, told Reuters.

Nevertheless, the markets will likely face what could be the steepest decline in quarterly earnings for S&P 500 companies since the financial crisis, according to IBES Refinitiv data. Given the ongoing concerns over a renewed coronavirus outbreak, many analysts are now predicting that S&P 500 earnings will return to growth only by 2021.

“There’s some optimism about the tone of the upcoming earnings,” Jane Foley, senior foreign exchange strategist at Rabobank, told the Wall Street Journal. “People have written off the second quarter, but they have high expectations for the third quarter.”

Wall Street banks, airlines, and other economic-bellwether companies are on tap to report quarterly earnings this week. S&P 500 company earnings are projected to plunge nearly 45% in the second quarter year-over-year, which would mark the steepest fall off since 2008. Analysts argued that the steep drop in earnings has already been priced into markets.

Positive economic data, though, has helped fuel optimism that the U.S. economy is recovering, despite the spike in Covid-19 cases.

“The market is treating these new cases like localized flare ups, as opposed to a second wave,” Tim Chubb, chief investment officer at Girard, told Reuters.

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