The Impressive Earnings Lineup We’ll See This Week

Covid-19 continues to surge across the U.S., and Big Media has trouble covering anything else.

And while it’s without a doubt a human and economic tragedy, the Reality Gap of the Week is that crucial deals are being made at the highest levels of government to support the global economy.

Deals that you won’t hear much about from Big Media.

China’s Shanghai Composite stock index jumped 3.1% overnight as regulators there raised the cap on how much insurers can invest in the stock market. The limit is now 45% of total assets, up from 30%. As insurers are generally flush with cash, this is a huge short-term shot in the arm for Chinese stocks.

Some of the money is likely to find its way to U.S. stock markets as well, which is partly why American stock futures recovered overnight too.

The big reason why markets are up overnight, however, was another government deal. Overnight, news reports started coming out that the EU was getting close to agreeing on a €750 billion stimulus bill.

Negotiations looked less rosy over the weekend, with the “Frugal Four” countries of Austria, Denmark, the Netherlands, and Sweden resisting a large deal. But it now seems like they are close to being on board, making traders optimistic that much-needed stimulus is coming.

Closer to home, Congress is also starting to debate a fifth round of stimulus. There’s a mix of ideas on the table including extending the extra pandemic unemployment payment that’s due to expire this week to keep consumer demand up, allocating more money for testing, and so on.

Add it all up, and traders are in an optimistic mood this morning. We’re even seeing what might be the early signs of last week’s profit-taking in big tech stocks reverse, as the tech-heavy Nasdaq is in the green while the Dow and S&P 500 are both slightly in the red pre-market.

Tech stocks had gotten overheated and were due for profit-taking. That’s especially true of the big names like Inc. (AMZN). But last week’s pullback in tech is temporary, and tech will be back sooner rather than later.

This week is also a big earnings week.

Microsoft Corp. (MSFT), the Teflon of tech stocks, reports on Wednesday after markets close. There will be no surprises here. I fully expect them to tell us how great things were this quarter, yet again.

Tesla Inc. (TSLA) also reports on Wednesday afternoon, and like most of what Tesla does, it’s going to be a coin toss. The stock could do anything between going up 10% or down 10%, with a slight advantage to the bulls, as always when Elon Musk is involved.

On Thursday morning, American Airlines Group Inc. (AAL) will report. They may already have announced all the bad news they could ahead of earnings, but that doesn’t mean they have any good news saved up to offset it all. Travel, especially international travel, is deep in the hole because of Covid-19, especially here in the U.S. American Airlines won’t be able to give us any reason to bid the stock up.

Finally, Intel Corp. (INTC) will report its quarterly earnings on Thursday afternoon. The chipmaker’s stock has been flat for five weeks now, and I don’t see earnings doing much to change that. But the company’s report and forecast should be good for the chip sector in general.

Great trading, stay safe out there, and God bless you,

D.R. Barton, Jr.

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