Investors have gone from betting on another round of trillion-dollar stimulus spending, to hoping a Democratic sweep in November will remove any uncertainty about the election, to worrying about yet another upward trend in Covid-19 cases in the United States and Europe.
Now, something far more mundane could help drive stock prices: earnings season.
The roughly one-month period, which brings a flurry of financial results from public companies, is upon us. It’ll be a chance to see how corporate bottom lines have been affected by the still uncontrolled pandemic.
Analysts are predicting that the companies in the S&P 500 will report a decline in profits of about 20 percent for the three months through September, compared with the same period last year. That would be ugly.
But it would be an improvement compared with the 32-percent tumble profits took during the second quarter, which was one of the worst quarters for earnings since 2009, when the U.S. was suffering the worst of a deep recession.
The numbers in earnings reports are always an estimation game on Wall Street, with results graded on a curve compared with the expectations that investors and analysts hold.
So when expectations are deeply negative, a not-as-bad result can fuel stock market gains. In the last reporting season, which got underway in July, a record number of companies did better than expected. That lifted the stock market to a high, even as a fresh coronavirus wave was slamming the economy.
The S&P 500 rose 5.5 percent in July and 7 percent in August, hitting its highest point in early September.
A similar less-bad-is-good dynamic could be in store for investors over the next few weeks. Wall Street banks reported their results last week, and they were much better than expected. (On the other hand, the airlines Delta and United posted disappointing numbers, even compared to already diminished expectations because of Covid-19.)
This week, the pace of reporting will pick up, with companies like IBM, Netflix, Procter & Gamble, Verizon, AT&T and Intel scheduled to release results. Analysts will scour that news for clues about economically important issues, such as whether further cost-cutting plans are coming down the pike, potentially weighing on economic growth.
Right now the predictions are that companies in industries that are sensitive to short-term economic swings, including industrial equipment companies and airlines, will produce the worst results over the next few weeks. While those in industries such as health care, consumer staples and technology — relatively insulated from the vicissitudes of the Covid economy — will fare better.
Either way, don’t expect corporate chiefs to be too chatty about the outlook for the future, given the scale of the uncertainty stretching into the future.
“Most managements will still be reluctant to provide forward earnings guidance,” wrote Goldman Sachs analysts in a preview of the next few weeks of results. “The uncertain timeline of a vaccine that is essential for the normalization of the economy, the stalled talks between the Trump administration and Congress on an interim fiscal package, and the contentious election that is only 25 days away are all valid reasons for executives to minimize forward-looking commentary.”
The Chinese economy surged 4.9 percent in the July-to-September quarter compared with the same months last year, the country’s National Bureau of Statistics announced on Monday. The robust performance brings China almost back up to the roughly 6 percent pace of growth that it was reporting before the pandemic.
Many of the world’s major economies have climbed quickly out of the depths of a contraction last spring, when shutdowns caused output to fall steeply. But China is the first to report growth that significantly surpasses where it was at this time last year. The United States and other nations are expected to report a third-quarter surge too, but they are still behind or just catching up to pre-pandemic levels.
China’s lead could widen further in the months to come. It has almost no local transmission of the virus now, while the United States and Europe face another accelerating wave of cases.
The vigorous expansion of the Chinese economy means that it is set to dominate global growth — accounting for at least 30 percent of the world’s economic growth this year and in the years to come, Justin Lin Yifu, a cabinet adviser and honorary dean of the National School of Development at Peking University, said at a recent government news conference in Beijing.
China’s economic growth in the past three months came in slightly below economists’ forecasts of 5.2 percent to 5.5 percent. But the performance was still strong enough that stock markets in Shanghai, Shenzhen and Hong Kong rose in early trading on Monday.
The country’s broadening recovery could also be seen in economic statistics just for September, which were also released on Monday. Retail sales climbed 3.3 percent last month from a year ago, while industrial production was up 6.9 percent.
Online shopping has exploded during the pandemic. The holidays are approaching. What happens when these two forces collide?
Some e-commerce experts predict a “shipageddon” — delays and chaos as parcel companies already stretched thin also tackle a surge in holiday packages.
The problem is simple: Buying habits changed in the pandemic, and delivery networks cannot keep up. Companies like FedEx and UPS already struggle to handle extra orders each holiday season, and they’re expecting Christmas 2020 to stretch them to the limits. They have announced larger-than-usual additional fees for larger retailers during the holiday.
Here are some practical tips for people planning their holiday shopping:
Don’t wait until the last minute. Retailers have less merchandise stocked up than usual for the holidays because the pandemic disrupted their typical inventory planning, said Jason Goldberg, the chief commerce strategy officer at the advertising giant Publicis. If there is a particular gift that you have your heart set on, it might not be there if you wait.
Consider alternatives to home delivery. Ordering online for curbside pickup at stores, for example, skips strained delivery systems. Retailers are also trying alternative delivery options, including sending orders from local stores via couriers working for companies like Instacart and Shipt.
One silver lining in the potential holiday shopping drama is that it makes makes plain the complexities of our shopping lives. Those mouse clicks on Amazon or Target have always set in motion a chaotic ballet of warehouse workers, truck drivers, parcel delivery couriers and more, but we mostly didn’t think about it. The shipping delays this year might reveal the strains at the seams.
The technology start-up Ultranauts has been working for years on the challenges confronting so many companies during the pandemic, and probably beyond: how to effectively work remotely, make progress toward diversity and inclusion goals, and build a strong organizational culture, writes The New York Times’ Steve Lohr.
The company, founded in 2013 by two former roommates at the Massachusetts Institute of Technology, has had a remote work force from Day 1. It was also founded to use the untapped talent of autistic people, who often think and process information differently from the rest of the population. Seventy-five percent of Ultranauts employees are on the autism spectrum.
The small start-up may offer lessons for corporate America in how to hire, manage and motivate far-flung employees, whose work and careers can suffer without the face time and hallway conversations of office life.
All video meetings have closed captioning, for workers who prefer to absorb information in text.
Meeting agendas are distributed in advance so people who are uncomfortable speaking up can contribute in writing beforehand.
Employees are asked daily for feedback, like whether they believe their strengths are valued and if they feel lonely at work.
“The whole idea is to create a safe space that allows everyone to be heard,” said Jamie Davila, who leads a team of eight engineers in seven states for Ultranauts from her home in Beaverton, Ore.
When the pandemic hit, Ultranauts, which is based in New York, lost business as a couple of large customers made cuts to conserve cash. But it picked up new work from companies that are accelerating digital projects despite the downturn. The business now has 90 employees, up from 60 a year ago. Its goal is to expand to 200 in two years.
The company insists its work force is a competitive advantage. The edge, it says, is not so much that autistic brains are wired for computing tasks but that people on the autism spectrum are a diverse group.