It was another terrific day with stocks flowing out of tech and into value once again as earnings season continues to outpace estimates and optimism grows over the economic reopening. Q1 is more than half over now and 87% of companies have beaten estimates leading to the Q1 profits forecast being raised once again, today to 46% growth vs Thursday’s 45% vs the 25% they started with weeks ago. As today’s expert put it, “There continues to be an underestimation of how strong this rally and how strong the economy is rebounding.”  The skepticism over Q1 seems to be waning as today’s volume was actually a tad greater than the 4-week average at 10.3 billion.  

Mon  May 3, 2021  5:01 PM EDT

S&P 500, Dow start month on strong footing, growth stocks lag

Shreyashi Sanyal, Krystal Hu

DJ: 33,874.85  -185.51         NAS: 13,962.68  -119.87       S&P: 4,181.17  -30.30      4/30

DJ: 34,113.23  +238.38         NAS: 13,895.12  -67.56         S&P: 4,192.66  +11.49     5/3

The S&P 500 and the Dow indexes ended higher on Monday amid a largely upbeat earnings season, while the Nasdaq came under pressure from declines in some high-flying growth stocks, as the rotation into cyclical and "reopening" stocks continued.  Economy-sensitive cyclical S&P 500 sectors such as consumer staples (.SPLRSC), energy (.SPNY), and materials (.SPLRCM) outperformed sectors housing growth stocks, including technology (.SPLRCM) and communication services, (.SPLRCL).

"All of those names that are having outsized gain today are as a result of economic reopening optimism, and people getting out of the house spending money on things," said Michael James, managing director of equity trading at Wedbush Securities.

Dow Jones Industrial Average (.DJI) rose 0.71% to end at 34,113.23 points, while the S&P 500 (.SPX) gained 0.27% to 4,192.65.  The Nasdaq Composite (.IXIC) dropped 0.48%, to 13,895.12.

Volume on U.S. exchanges was 10.29 billion shares, compared with the 9.86 billion average for the full session over the last 20 trading days.

"We've seen a slight change in the pace of value stocks outperforming growth stocks year-to-date," said Rod von Lipsey, managing director at UBS Private Wealth Management.  The Nasdaq index (.IXIC) fell as megacap technology stocks, including Amazon.com Inc (AMZN.O), Alphabet Inc (GOOGL.O), Facebook Inc (FB.O) and Microsoft Corp (MSFT.O), traded lower despite largely upbeat results.  The stocks have struggled to maintain the upward trajectory coming into reporting season. Chipmakers also fell, with the Philadelphia SE Semicondutor index (.SOX) down.

With more than half of S&P 500 companies having reported so far, profits are now seen rising 46% in the first quarter, compared with forecasts of 24% growth at the start of April, according to IBES data from Refinitiv. About 87% of the companies have come also reported earnings per share ahead of analysts' estimates. read more  "This is now the fourth straight quarter of earnings just absolutely crushing estimates," said Ross Mayfield, investment strategy analyst at Baird. "I think there just continues to be an underestimation of how strong this rally and how strong the economy is rebounding."

Strong earnings, improving economic data, fiscal stimulus and the Federal Reserve's ultra accommodative stance have supported markets, pushing the S&P 500 and the Nasdaq indexes to record levels last week.  U.S. manufacturing activity grew at a slower pace in April, likely constrained by shortages of inputs amid pent-up demand due to rising vaccinations and massive fiscal stimulus. read more  The Labor Department's non-farm payrolls data, slated to be released on Friday, is expected to show a rise in job additions in April.

Gap Inc (GPS.N) is one of the biggest gainers on S&P 500 on Monday. The largest decliner was Estee Lauder (EL.N) after the cosmetics maker missed analysts' estimates for third-quarter sales. read more  On the Nasdaq 100 the largest gainer was Moderna Inc , which rose after the drugmaker said it will supply 34 million doses of its COVID-19 vaccine this year to the global COVAX program.  Tesla Inc (TSLA.O) fell as industry sources told Reuters the electric-vehicle maker, under scrutiny in China over safety and customer service complaints, is boosting its engagement with mainland regulators and beefing up its government relations team. read more  T-Mobile (TMUS.O), Uber (UBER.K), Lyft (LYFT.O), Square (SQ), Peloton (PTON.O) and Pfizer (PFE) are poised to report results later this week.