Big earnings for Big Tech continue to pump up Wall Street, as fizzling stimulus talks are kept on the back burner.
MANHATTAN (CN) — Markets opened Monday on a positive note, still enjoying the residual gains from Big Tech’s positive earnings last week.
By the closing bell, the Dow Jones Industrial Average gained 236 points, a 0.9% increase, while the S&P 500 gained 0.7%. The Nasdaq set a new high mark, closing at 10,902 points, nearly a 1.5% increase for the day.
The rally was driven primarily by several tech stocks: Apple and Microsoft gained 2.5% and 5.6%, respectively. Not all tech stocks fared as well, however. Google’s parent Alphabet lost 5% while Facebook dropped 1.7%.
Only a few other name-brand companies released earnings during trading hours on Monday. In its release, Clorox posted an impressive 22% increase in sales last quarter compared with the same quarter in 2019, with all of its divisions showing double-digit percentage increases over that period.
“I’m pleased that we’ve delivered a quarter of exceptional results, fueled by strong demand for our products that we’ve been privileged to provide in support of public health and to serve some of the essential needs of consumers as they’ve had to stay at home more,” CEO Benno Dorer said in a statement.
The company expects flat to low single-digit increase in sales in 2021, though it noted the outlook of the Covid-19 pandemic is uncertain. Shares of the company skyrocketed early this morning but then dropped after the morning bell.
In its first quarter earnings release, McKesson — which operates on a different fiscal calendar than many other companies — reported relatively flat revenues year over year but a 28% drop in adjusted earnings per share.
McKesson was kept afloat by higher volumes from its retail national account customers but saw some losses due to lower prescription volumes and primary care visits during the pandemic. Due to its first quarter outperforming expectations, the health care company raised its previous guidance for adjusted earnings later in the year.
“I think that what is happening is a V-shaped recovery of [earnings per share] and not GDP,” wrote Peter Ricchiuti, a finance professor at Tulane University in an email. “Companies have cleared the decks, written off all kinds of unsuccessful divisions/projects and have figured out how to run leaner.”
Meanwhile, investors are anxiously awaiting congressional action on a fourth pending stimulus package, which has been hung up due to ideological fight over unemployment and liability protections.
Senate Republicans led by Mitch McConnell have said the safe harbor is a “must-include” issue in any stimulus package, while Democrats have called the safe harbor a bailout for bad corporate actors.
But cracks are starting to form on the Republican side, as the Trump administration has hinted it was willing to jettison the proposal.
White House chief of staff Mark Meadows suggested over the weekend that a liability shield should be kept as a separate bill, hinting that a stimulus package may move without the safe harbor. “If we can do that along with liability protection, perhaps we put that forward, get that passed as we can negotiate on the rest of the bill in the weeks to come,” he told ABC News on Sunday.
Several business trade groups have all but demanded a safe harbor be signed into law. Last Thursday, a group of a few hundred chambers of commerce sent letter to lawmakers calling for liability protections.
“It is impossible to understate what an enormous mistake it would be to exclude temporary liability protections from the next coronavirus relief package,” U.S. Chamber of Commerce Chief Policy Officer Neil Bradley said last week. “The entire business community, universities and college, and local school boards across the country are all united in support for a liability safe harbor for those who adhere to public health guidelines.”
Many other industries are worrying about the issue of legal liability for Covid-19 infections, hospitalizations and deaths.
Scott Carlson, a senior writer for The Chronicle of Higher Education, noted during a webcast with experts at University of North Carolina’s Kenan-Flagler Business School that while some schools are trying to institute liability waivers for both students and employees, some schools are hedging on the safe side.
About one-third of colleges and universities nationwide have already moved to online classes for the upcoming semester, he noted, adding that many schools are shuttering their sports programs to avoid liability, even those in small towns that rely heavily on sports programs.
“Lots of the waivers being thrown about would not be effective,” Carlson said during the webcast. “I think the legal situation is pretty precarious for a lot of colleges and universities.”
Legal liability is not the only sticking point for the next stimulus. Other programs, such as the $600 plus-up for unemployment benefits that expired last week, have reportedly held up talks on the next package. House Speaker Nancy Pelosi has stated she wants the $600 plus-up to remain as long as unemployment remains high, while key White House advisers like Stephen Moore say the benefit is holding up the economy.
The Senate is scheduled to leave for August recess at the end of the week, but if no deal is reached the recess could be postponed.