Here’s When Earnings Season Really Begins - Barron's

Traders work during the opening bell at the New York Stock Exchange.

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Earnings season is upon us again. And once again, it’s the future, not that past, that matters.

With fourth-quarter earnings for the S&P 500 expected to fall about 9% from a year ago, that’s a good thing. While earnings in health care, pharmaceuticals, technology are expected to grow, profits at industrials, energy companies, and banks are still falling.

We know the numbers will be better than that because companies always beat expectations. In the third quarter, roughly 85% of firms in the S&P 500 beat estimates. Those beats didn’t matter: The average stock fell 0.2% in reaction to earnings. That’s because the market is always looking ahead.

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And right now, it’s looking ahead to the rest of this year. Earnings are expected to grow almost 60% in the first half of 2021, a big jump over pandemic-marred results from the first half of 2020.

These days, earnings season is said to start with the banks like JPMorgan Chase that begin reporting on Friday. But Delta Air Lines beats them by one day. The airline, which reports Thursday morning, is expected to lose about $1.5 billion in the fourth quarter.

Taiwan Semiconductor Manufacturing, a $500 billion behemoth in an economically sensitive industry, also reports Thursday. Earnings are expected to grow almost 20% year over year.

We’ll be listening for what it says about 2021.

—Al Root

*** Join Barron’s Beverly Goodman and contributing writer Sarah Max about how Walmart went from one of the worst offenders on ESG factors to a secretly top-notch ESG company. Register here.

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House Democrats Move Forward With Impeachment

House Democrats introduced an article of impeachment against President Donald Trump Monday and are set to go ahead with a full floor vote Tuesday on a resolution calling for the president to be removed through the 25th Amendment.

• Democrats brought the resolution calling for Vice President Mike Pence and cabinet members to remove the president using the 25th Amendment forward under unanimous consent, which was blocked, as expected, by a Republican objection.
• Democrats plan to give the resolution a full vote Tuesday, before bringing an article of impeachment to the floor for a vote Wednesday. The article of impeachment charges the president with “inciting violence against the government of the United States.”
• President-elect Joe Biden said his first priority is getting a stimulus bill passed and that the Senate should “bifurcate” its time between an impeachment trial and working to pass his legislative agenda.
• Biden said he had asked the Senate parliamentarian if the chamber could “go a half day with the impeachment and a half day getting my people nominated and confirmed in the Senate as well as moving on the [coronavirus stimulus] package.”
• Thus far, only one Republican senator, Pat Toomey of Pennsylvania, has publicly backed impeachment. Sen. Lisa Murkowski (R., Alaska) and Sen. Ben Sasse (R., Neb.) have both said Trump should resign, while Sen. Mitt Romney (R., Utah) previously voted to remove Trump during last year’s impeachment push.

What’s Next: As the legal and political fallout from the deadly riot on Capitol Hill continues to unfold, the FBI warned that armed protests are being planned in every state capitol between now and Inauguration Day.

—Ben Walsh

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Corporate America Reacts to Capitol Hill Riot With Donation Pause

A growing list of U.S. companies are suspending or re-evaluating how they choose to make contributions to political candidates as pressure grows on them to distance themselves from the mob that stormed Capitol Hill.

• A broad swath of companies, from Citigroup to UPS, are pausing their political giving for various periods of time, and in some cases, saying that they are working to revamp their policies governing which candidates they give to, with an eye toward likely cutting off donations to lawmakers who voted against certification.
• Among the companies that paused political giving was America’s largest bank by assets, JPMorgan Chase, which gave $5.3 million to candidates over the course of the 2020 election cycle, according to federal filings.
• Marriott and Dow said that they will stop donations to Republicans who objected to President-elect Joe Biden’s victory being certified. Hallmark is asking Senators Josh Hawley of Missouri and Roger Marshall of Kansas, both of whom objected to Biden’s certification, to return the $7,000 and $5,000 the company donated to their respective campaigns.

What’s Next: Some companies that have halted political contributions will likely rewrite their political giving policies, but the timing of the cascade of announcements is unlikely to disrupt much planned giving, because the 2020 election cycle just ended and corporate giving has not yet ramped up for the 2022 midterms.

—Ben Walsh

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Europe Steps Up Defenses Against New Covid Variants

New, aggressive mutations of the coronavirus first discovered in the U.K. and South Africa are forcing governments to increase the severity of lockdowns and other restrictions, and prompt a clampdown on rulebreakers.

• The new variant has already been detected in countries such as Germany, France, Spain, Ireland and Denmark, with some requiring negative Covid tests from inbound travelers.
• The French prime minister refused Monday to rule out the possibility of a third national lockdown. The government has so far stopped short or such a step, contrary to most other EU countries. But a national curfew is already in place, along with the closure of bars, restaurants and public venues.
• The U.K. government will require from Jan. 15 all inbound travelers, including British citizens, to produce a negative Covid test realized in the three days before their departure.
• The British police will be tasked with enforcing mask-wearing and other restrictions in supermarkets, amid growing signs of lax public compliance with the lockdown, as witnessed by public transport
• Among the major European countries, Italy so far has the worst pandemic death toll with 1,314 fatalities per million inhabitants, followed by the U.K. (1,228), Spain (1,110), France (1,017) and Germany (503). The U.S.’s, by comparison, is at 1,146 deaths per million.

What’s Next: The severity of the current wave puts pressure on authorities to speed up the vaccination campaigns that started during the holidays. But logistical mistakes or bureaucratic snafus in many countries are testing the limits of the public’s patience.

—Pierre Briançon

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Carnival Reports Huge Loss as Cruise Industry Awaits Vaccination Boost

Almost no industry in the U.S. has taken as sharp and lengthy a hit during the Covid-19 pandemic as cruise operators.

• Nearly a year after infections halted U.S.-based cruises, Carnival reported a $2.2 billion quarterly loss Monday. The preliminary result was in-line with expectations and barely moved shares, which have dropped almost 59% over the past 12 months.
• Once Carnival has approval from the Centers for Disease Control and Prevention to book passengers on voyages, the company says it is “well-positioned to capitalize on pent-up demand,” CEO Arnold Donald said on an investor call.
• When exactly that moment will come is unclear. Beyond regulatory approval, the cruise industry will likely need widespread immunization among passengers and staff to resume any semblance of business as normal.
• The CDC has not said when cruise operators can resume sailing and is requiring them to apply at least 60 days in advance before resuming sailings. They also must conduct mock sailings, but no timing has been set for those. Carnival has paused all U.S. cruises at least through March.
• The resumption of limited cruise voyages has appeared close before, when it was reported in the fall that the CDC’s no-sail order would be lifted on Oct. 31, only for the agency to extend its cruise ban.

What’s Next: The Carnival CEO said he hopes the company is able to resume some sailings by the end of the year.

—Ben Walsh

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Walmart Plans Fintech Start-up

Walmart is diving into the fintech space, and it’s teaming up with one of the venture-capital firms behind Robinhood.

• The retail giant said it’s forming a start-up with Ribbit Capital to offer affordable financial services for customers and employees. It will be majority-owned by Walmart and include two of its executives on its board, along with Meyer Malka, managing partner of Ribbit Capital, and industry experts.
• Ribbit’s portfolio includes retail investing app Robinhood, credit score monitor Credit Karma, and payment plan firm Affirm. Walmart said the service, which hasn’t been named publicly, will combine its retail expertise with Ribbit’s fintech know how.
• John Furner, president and CEO of Walmart US, said customers have “made it clear they want more from us in the financial services arena.” The company said it will continue to offer its existing financial services, which include a credit card, a debit card, check cashing and money transfers.

What’s Next: Shares of fintech firms Green Dot and MoneyGram International dipped following the announcement in after-hours trading. Walmart shares climbed 1.4%.

—Connor Smith

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Congrats to the winners of the December virtual stock exchange game! Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.

Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.

Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and, at the end of the challenge, the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.

Are you ready to compete? Join the challenge and pick your stocks here.

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—Newsletter edited by Anita Hamilton, Mary Romano, Stacy Ozol, Matt Bemer, Ben Levisohn

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