It's been a mixed earnings season, with some sectors doing much better than others during lockdowns.
Markets are drifting as investor attention temporarily turns away from the macro issues to concentrate on a raft of company reports.
In the US, the pandemic has been beneficial for the likes of 3M (NYSE:MMM), where demand for hand sanitisers and safety glasses propelled profits, while numbers for Johnson & Johnson (NYSE:JNJ) were also well received. There was a less positive outcome for Starbucks (NASDAQ:SBUX), as its customers were kept at home due to lockdowns.
The star of the show was Microsoft (NASDAQ:MSFT), where a better than expected 33% rise in quarterly profit was announced after the bell. A strong showing from its Azure cloud computing unit added to the optimism, and the 43% rise in the share price over the last year incorporates a 72% recovery since the March low. The numbers also augur well for the big tech space as the remainder of the sector reports imminently against heightened expectations.
With the Federal Reserve policy meeting to come later today, there are unlikely to be any new revelations on the Fed’s stance, rather a reiteration of its intention to maintain a loose monetary policy for the foreseeable future.
The main indices remain in positive territory for the year, with the Dow Jones ahead by 1.1%, the S&P500 2.5% and the Nasdaq 5.7%.
In the UK, markets are also being hamstrung by slowing momentum, with a lack of obvious near-term positive catalysts combining with the resilience of sterling to crimp gains in the major index. The FTSE 100 remains ahead by 2.3% in the year to date, although its exposure to cyclical businesses such as the oils and banks currently leaves those sectors in suspended animation before any economic recovery kicks in.
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