Stocks moved lower mid-week as investors digested a disappointing private payroll report from ADP. The employment report showed that 330,000 jobs were created, well below the 692,000 jobs added in June, and well short of the consensus estimate of 700,000. COVID-19 remains a concern, as the Delta Variant spreads and cases increase. Mask mandates are returning in some areas, and the U.S. has now surpassed 36 million cases, with over 630,000 deaths. The U.S. economy continues to recover from the COVID-19 pandemic, which triggered nationwide lockdowns over a year ago. Most states had relaxed restrictions as vaccinations continued to roll out and cases decreased.

The Federal Reserve is still expected to start trimming its bond purchases later this year or early next year, however, the spreading Delta Variant could lead the central bank to communicate a more cautious outlook. In IPO news, Robinhood Markets soared more than 30% to a new high, extending Monday’s 24% gain. Earnings have been generally strong in the second quarter, with Factset reporting as follows:

For the Earnings Scorecard: Q2 2021 (with 59% of S&P 500 companies reporting actual results), 88% of S&P 500 companies have reported a positive EPS surprise and 88% of S&P 500 companies have reported a positive revenue surprise. In Earnings Growth: Q2 2021, the blended earnings growth rate for the S&P 500 is 85.1%. This would mark the highest year-over-year earnings growth rate reported by the index since Q4 2009 (109.1%). For Valuation: The forward 12-month P/E ratio for the S&P 500 is 21.2. This P/E ratio is above the 5-year average (18.1) and above the 10-year average (16.2). In key earnings news, automakers were in the spotlight this week. General Motors (GM) was down more than 7% in heavy trade after its earnings missed views. General Motors though, beat on revenue and raised its full-year estimates amid strong pricing. Toyota Motor (TM) and Honda Motor (HMC) both reported better-than-expected quarterly earnings, though chip shortages remain a concern.

Submitted by: Austin Schaul, Head of Research
Source: GSAM, CNBC, JPM, Investors.com, Factset

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