S&P 500 Index: Earnings upgrades to drive further upside – DBS Bank

Riding on the tailwinds of robust macroeconomic data and strong corporate earnings, the rally in the S&P 500 Index remains unabated. The strong showing displayed by US corporates in the 1Q21 reporting season suggests that the positive momentum will persist, according to economists at DBS Bank.

See – S&P 500 Index: Three factors to contribute to the stock market trailing the economy – CE

Strong corporate earnings underline the resilience of US equities

“87% reported positive earnings surprise and the momentum was particularly strong in sectors like Technology (97%), Consumer Discretionary (93%), and Financials (93%).”

“Actual earnings exceeded consensus forecast by 23% in aggregate. The strongest earnings beat is seen in the following sectors: Consumer Discretionary (62%), Financials (37%), and Communications Services (35%).”

“Given the strong set of earnings in 1Q21, we believe that there is a compelling case for upward earnings revisions in coming months. Market consensus is expecting US earnings to grow 48.1% in 2021, underpinned by a combination of moderate top-line growth and substantial margin expansion.” 

“As the US economic recovery gathers momentum, top-line revenue will likely come in stronger than expected in the coming months.”