The stock market gets hot at the start of the first quarter earnings season.
A formidable rally has pushed the S&P 500 up 9.9% this year to 20 close records, keeping stock valuations at historic highs. However, some investors say stocks may have more leeway as the introduction of Covid-19 vaccines and abundant government spending bolster the outlook for corporate earnings.
Earnings season kicks off in earnest this week, with results from America’s major banks – including JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co – and companies ranging from Delta Air Lines Inc. to PepsiCo Inc. and UnitedHealth Group Inc.
Investors will watch for signs of executive confidence that client demand will continue to rise and that cost increases can be managed to mitigate concerns that stocks look expensive.
The S&P 500 was trading at 22.6 times expected earnings over the next 12 months on Thursday, above the five-year average of 18.14, according to FactSet. Paying, even for shares of high-quality companies, creates the prospect of dampened future returns for shareholders.