First-quarter earnings season picks up steam this week, with analysts expecting that profits for S&P 500 companies rose roughly 27 percent in the three months through March, compared with a year earlier when the pandemic sent corporate earnings into a tailspin.
Companies such as Coca-Cola, United Airlines, Netflix, AT&T and American Express all slated to issue results this week, offering a relatively well-rounded look at the state of corporate America in the early days of what could be a powerful year for the U.S. economy. It might also help set expectations for the stock market, after a big rally already this year.
The consensus among 76 economists polled by Bloomberg is that gross domestic product will expand by 6.2 percent in 2021, which would make it the best year for economic growth since 1984. And sentiment among analysts covering the stock market is almost universally bullish, given that strong economic tailwind.
“You’d almost have to be self-deceiving to expect U.S. companies overall to underperform consensus, given how the macro backdrop is driving revenues so well,” wrote John Vail, chief global strategist at Nikko Asset Management.
The expectations for profit growth are even more elevated for the current quarter: Analysts expect that the three months ending in June will see companies in the S&P 500 notch a 54-percent rise in profits, compared with the prior year.
That increase, of course, reflects a rebound from the worst of the pandemic-bred downturn. But it also is a result of “economic re-acceleration, and a rebound in commodity prices,” said Jonathan Golub, a stock market analyst at Credit Suisse.
Of course, if everyone is expecting such a surge in profits, the good news could already be fully incorporated into stock prices — and that means anything short of perfect results would make for a difficult stretch for stocks.
That has certainly been the case with some of the banks that reported earnings last week. Shares of Morgan Stanley, for example, dropped 2.8 percent on Friday even though the bank reported record revenue and profit.
The S&P 500 is already up more than 11 percent in 2021, and hit yet another record high on Friday.
That could mean the market is due for a pullback anyway. The index is relatively expensive by metrics such as the price-to-earnings ratio, which compares stock prices as a share of expected corporate profits over the next 12 months.
The S&P 500 is trading at nearly 23 times expected earnings. That’s roughly the valuation the index has held for most of the past year, but it’s very high by historical standards.
Over the last 20 years, the S&P 500 has traded at an average of 16 times expected earnings.
By comparison, a valuation of 23 times expected earnings is closer to where stock market valuations stood at the tail-end of the dot-com bubble of the late 1990s. When that ended, the S&P 500 fell roughly 50 percent before it hit bottom.
More people are flying every day, as Covid restrictions ease and vaccinations accelerate. But dangerous variants have led to new outbreaks, raising fears of a deadly prolonging of the pandemic.
To understand how safe it is to fly now, The Times enlisted researchers to simulate how air particles flow within the cabin of an airplane, and how potential viral elements may pose a risk.
For instance, when a passenger sneezes, air blown from the sides pushes particles toward the aisle, where they combine with air from the opposite row. Not all particles are the same size, and most don’t contain infectious viral matter. But if passengers nearby weren’t wearing masks, even briefly to eat a snack, the sneezed air could increase their chances of inhaling viral particles.
How air flows in planes is not the only part of the safety equation, according to infectious-disease experts. The potential for exposure may be just as high, if not higher, when people are in the terminal, sitting in airport restaurants and bars or going through the security line.
“The challenge isn’t just on a plane,” said Saskia Popescu, an epidemiologist specializing in infection prevention. “Consider the airport and the whole journey.”
Members of the National Association of Realtors — the nation’s largest industry group, numbering 1.4 million real estate professionals — are challenging a moratorium on evictions put in place by the Centers for Disease Control and Prevention.
Both the Alabama and the Georgia Associations of Realtors sued the federal government over the matter, and the national association is paying for all of the legal costs. A hearing is scheduled for April 29, Ron Lieber reports for The New York Times.
The N.A.R. spends more money on federal lobbying than any other entity, according to the Center for Responsive for Politics. To puzzle out its actions and advocacy, let’s first be crystal clear about what the N.A.R. is and whose interests it serves. As its own chief executive boasted to members in 2017, it’s really the National Association for Realtors, not of them.
And of those million-plus members, according to the association, about 38 percent own at least one rental property. The N.A.R. isn’t shy about this, stating on the lobbying section of its website that it wants to “protect property interests.”
Why would it do this? The N.A.R. expert on the topic was unable to schedule a phone call, according to a spokesman.
But if you’re selecting a listing agent for your house from among their members, ask that person about this issue if you’re curious or concerned. Many of them have no idea what the N.A.R. is advocating on their behalf.
Here come the lobbyists.
The cryptocurrency exchange Coinbase, the asset manager Fidelity, the payments company Square and the investment firm Paradigm have established a new trade group in Washington: The Crypto Council for Innovation. The group hopes to influence policies that will be critical for expanding the use of cryptocurrencies in conjunction with traditional finance, Ephrat Livni reports in the DealBook newsletter.
Cryptocurrencies are still mostly held as speculative assets, but some experts believe Bitcoin and related blockchain technologies will become fundamental parts of the financial system, and the success of businesses built around the technology may also invite more attention from regulators.
“We’re going to increasingly be having scrutiny about what we’re doing,” Brian Armstrong, Coinbase’s chief executive, said on CNBC. “We’re very excited and happy to play by the rules,” he added, but regulation of crypto should be on a “level playing field with traditional financial services.”
Here are four of the issues that will keep crypto lobbyists busy:
The Crypto Council’s first commissioned publication is an analysis of Bitcoin’s illicit use, and it concludes that concerns are “significantly overstated” and that blockchain technology could be better used by law enforcement to stop crime and collect intelligence.
New anti-money-laundering rules passed this year will significantly expand disclosures for digital currencies. The Treasury Department has also proposed rules that would require detailed reporting for transactions over $3,000 involving “unhosted wallets,” or digital wallets that are not associated with a third-party financial institution, and require institutions handling cryptocurrencies to process more data.
When is a digital asset a security and when is it a commodity? Bitcoin and other cryptocurrencies that are released via a decentralized network generally qualify as commodities and are less heavily regulated than securities, which represent a stake in a venture. Tokens released by people and companies are more likely to be characterized as securities because they more often represent a stake in the issuer’s project.
The Chinese government is already experimenting with a central bank digital currency, a digital yuan. China would be the first country to create a virtual currency, but many are considering it. Some crypto advocates worry that China’s alacrity in the space threatens the dollar, national security and American competitiveness.