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Markets Flat Aside from Dow, United Beats & Raises

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Markets closed relatively flat for the most part today, following a decent start to the year, and just as Q4 earnings season begins to heat up. The outlier here was the blue-chip Dow, which sold off -1.14% on the session. The S&P 500 was -0.20%, while the Nasdaq was +0.14%. The small-cap Russell 2000 slid -0.15% on the day.

The Dow’s  weighed down by Goldman Sachs’ (GS - Free Report) -6.4% drop on worse-than-expected Q4 numbers and Travelers Insurance (TRV - Free Report) -4.6% on its downward guidance ahead of its Q4 report due Jan. 24th. Goldman’s numbers were discussed in this space this morning (click here), while Travelers has lowered earnings guidance from $4.04 per share previously to $3.44 today. This is largely due to catastrophic losses due to the massive blizzards in Buffalo and elsewhere that reportedly has cost the company $362 million after taxes, net of reinsurance.

That said, an otherwise tame day reveals an agnostic market in these early stages of Q4 earnings, and still two weeks out from the next Fed interest rate hike, which will either be 25 or 50 bps, depending on the strength of economic data coming out between now and then. However, two main data points — monthly nonfarm payrolls and CPI, both for December — have so far found our economic reality in fairly Goldilocks territory.

United Airlines (UAL - Free Report) posted a strong beat-and-raise in its Q4 results after today’s closing bell, with earnings of $2.46 per share well ahead of the $2.07 expected (and miles beyond the -$1.60 per share the airline reported in the year-ago quarter, which was still Covid-impacted). Revenues came in at $12.4 billion, nicely above the $12.23 billion in the Zacks consensus, which itself was +49% growth year over year.

Lest we think this is a short-lived, pent-up demand scenario for United coming out of the pandemic, guidance for next quarter and the full fiscal year look for much more strength ahead: earnings are now expected to come in between 50 cents and $1.00 per share, with full-year earnings between $10-12 per share. These figures are way beyond the previous Zacks consensus estimates of 10 cents and $2.14 per share, respectively. United also looks to have full-year pre-tax operating margin growth of +9%.

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