US companies continue to report their Q1 earnings, getting the most attention from investors. As for those firms that have already delivered their quarterly reports, an interesting tendency has been revealed. The share of companies whose earning results exceeded expectations have never been so high (87%). The figures have never exceeded expectations by almost 23%. In this light, can we talk about economic growth in the United States?
Indeed, we can since mainly positive macroeconomic data has recently been presented. Firstly, there is a $4.1 trillion stimulus plan of US President Joe Biden. Secondly, the country's GDP increased by 6.4% in the first quarter of 2021 from the same period in 2020. In addition, the interest rate is kept on one level, the employment rate is decreasing, people get their vaccine shots, and strict COVID-19 measures are introduced.
At the same time, Biden may face both political and economic pressure due to his tax hikes on the rich. There are other factors that cannot be considered optimistic for economic growth in the US. On Monday, May 3, two manufacturing business activity reports were released in the country. The IHS Markit PMI rose to 60.5, slightly up from March. The ISM Manufacturing PMI dropped to 60.7 in April from 64.7 in March. On top of that, a slight increase in the inflation rate has been recorded, which, by the way, may increase significantly if the growth scenario plays out.
As for the main US stock indices, they were mixed at the start of the trading week, reflecting uncertainty over the current state of the American economy.
The Dow Jones Industrial Average climbed on Monday and Tuesday, settling at 34,133.03. The Standard & Poor's 500 advanced on Monday but dropped to 4164.66 on Tuesday. Meanwhile, the Nasdaq-100 tumbled below 13,600 in the first two trading days.
The recent correction of tech stocks, including such giants as Amazon, Apple, Facebook, Intel, and Microsoft, signals that market players should be careful when making their investment decisions. Anyway, given positive macroeconomic data, US economic growth prospects are real, meaning that shares of US companies may advance in the long term.
