S & P500 records driven by good company results for QXNUMX

S & P500 index The eighth day in a row ended the day with a record closing rate. This is the longest such series since 1997. What drives the index are very good results of companies for the third quarter.

On Monday, the S & P500 closed at 4701,70 points. This is the eighth consecutive trading day on which the index closes with a record. We have not seen such a series on the American market since June 1997. Such increases were influenced by the good results of US companies for the third quarter announced in recent weeks.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

445 out of 500 companies have already reported their results

The earnings season started on October 12 and is coming to an end. Currently, 445 out of 500 companies from the S & P500 index have already reported their results. This week, the results will be presented by another 13. So far, the results above analysts' expectations have been shown by 80,7%. companies. In the previous quarter, expectations exceeded 86,2 percent. companies and this record will not be broken. However, the long-term average for the last 30 years is 66%. and this quarter is one of the best in history in this respect. Conservative analysts' forecasts, which we have been observing for several quarters, help to achieve such good results in relation to expectations.

It is worth remembering that we refer to earlier forecasts because they are usually already included in the valuation of the company's stock. Thus, only changes to expectations and forecasts may affect the share price of a given company. For example, if a company is reporting a record high performance, but the results were fully predictable and in line with forecasts, then the share price should not have increased significantly as the good performance has already been included in the valuation.

The results themselves are also very good, because the reported profits of companies from the S & P500 so far increased by 41,5 percent. y / y If companies in the energy sector, whose results increased the most, were excluded from these results, the overall increase would be 33,2 percent. You have to remember that these results refer to Q3 2020, which was worse due to pandemic and lockdowns. In the previous quarter, profits increased by 96%. y / y, but analysts' forecasts for the future remain underestimated. Economic activity continues to grow and margins remain unchanged. The biggest beneficiaries of this situation should be cyclical companies, from the energy sector to the industrial sector. We estimate that next year's profit growth may be even two times higher than the current forecasts.

Europe is also doing quite well

American companies, most of which operate outside the US, outperformed those focused mainly on the domestic market. European companies also presented very good results. More than half of the companies from the European index presented their results Stoxx600 - profits are 57 percent higher y / y The largest increase in profits was recorded in the United Kingdom (+170%), Poland (+133%) and the Netherlands (+112%). The Polish companies included in this index include, among others KGHM, CD Project and PZU.