LIVE MARKETS-Is this the start of a "no reward" earnings season?

* Nasdaq, S&P 500 higher in afternoon trade; Dow down
slightly
* Utilities lead S&P sector gainers; energy weakest group
* Dollar, gold, crude edge up
* US 10-Year Treasury yield ~1.04%

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IS THIS THE START OF A "NO REWARD" EARNINGS SEASON? (1330
EST/1830 GMT)
Early rounds in the S&P 500 fourth-quarter earnings
season show that companies are getting no reward from investors
even as results are handily beating analysts' expectations, BofA
Securities strategists wrote in a note Monday.
"We're in the early innings of a quarter with no reward - in
fact, a record 1.6ppt underperformance penalty - for beats,"
they wrote.
Companies are not faring any better when they give upbeat
outlooks either, they said.
"Quite the opposite: so far we see a very unusual penalty
for raising guidance – 20bps of negative 1-day alpha vs. the
average positive 2ppt alpha since 2007," they wrote, adding:
"The last time we saw such a perverse market reaction to
earnings was during 2Q 2000 earnings season, after which the S&P
500 fell by 13% over the next three months amid a marked change
in leadership, with Value outperforming growth by over 25ppt."
As of Friday, 87.9% of earnings reports were above analysts'
expectations, based on results from 66 S&P 500 companies,
according to IBES data from Refinitiv. That compares with an
average beat rate of 76% of companies over the past four
quarters.

(Caroline Valetkevitch)
*****

2021 IS NOW RED FOR FRANKFURT AND PARIS (1150 EST/1650 GMT)
The selling which took place on the pan-European STOXX 600
today was overall limited (-0.9%) but for many blue chip
indexes, it was the straw that broke the camel's back.
With the DAX and the CAC 40 both down about 1.6% at the
close, Frankfurt and Paris are now actually in the red
year-to-date by 0.6% and 1.4% respectively.
Other big bourses such as Milan and Madrid, are also in
negative territory, down 2.2% for both the FTSE MIB and the
IBEX.
One exception is London (FTSE 100 up 2.8%) which is still
enjoying the fell-good effect of the EU-UK post Brexit deal but
with trade frictions on the rise, the positive trend could also
fade out.
There's been some expectations that European stocks could
play catch-up with their U.S. counterparts this year but it's
not clearly looking that promising at the moment.
Big tech, which Europe Inc lacks badly of, is still very
much the flavour of the year as the Nasdaq can testify, just
like it was in 2020.
Value and cyclicals, which are heavy constituents of the
continent's blue chip indexes, took quite a beating today.
Banks lost 3%, autos fell 2.9%, oil and gas were down 2% and
with COVID-19 social restrictions slowing down the recovery,
their prospects don't look that shiny in the very short term.

(Julien Ponthus)
*****

WALL ST LOWER IN VOLATILE LATE MORNING TRADE (1115 EST/1615
GMT)
Major U.S. stock indexes each briefly traded more than 1%
lower late morning before recovering to trade just moderately
lower, led by declines in the Dow.
The Cboe Volatility index hit its highest level since
Jan. 6.
Investors were trying to gauge whether officials in U.S.
President Joe Biden's administration could head off Republican
concerns that his $1.9 trillion pandemic relief proposal was too
expensive.




(Caroline Valetkevitch)
*****

NASDAQ HITS RECORD AS TECH EARNINGS IN FOCUS (1025 EST/1525
GMT)
The Nasdaq hit a record high at the opening and was
last up more than 1% in early trading on Monday as investors
focused on earnings from technology-related companies this week.
The S&P 500 was also higher while the Dow was
lower in early trading.
The S&P 500 technology sector was up more than 1%
and provided the biggest boost to the S&P 500, while the
utilities sector led percentage gains among sectors.
Reports are expected this week from major companies
including Apple, Microsoft and Facebook
, which could support technology and growth stocks after a
recent strong run by more cyclical sectors including banks.

A decline in Merck & Co shares weighed on the Dow.
Its shares were down about 0.8% after the drugmaker ended its
COVID-19 vaccine program.

(Caroline Valetkevitch)
*****


THE NEXT VACCINE EVENT (935 EST/1435 GMT)
The availability of two vaccines against the novel
coronavirus has given the stock market a huge lift, but
investors are staying hopeful that more options will prove
successful to further speed the world's emergence from the
pandemic.
With that in mind, investors are focusing on Johnson &
Johnson and any news about the company's experimental
vaccine when it reports fourth-quarter results on Tuesday.
"The Johnson & Johnson vaccine... will be incredibly helpful
in accelerating vaccinations," Katie Nixon, chief investment
officer at Northern Trust Wealth Management, said in a recent
written commentary, noting that the early experience with the
overall vaccine rollout has been "underwhelming".
J&J's chief scientific officer said earlier in January that
the company expects to have clear data on how effective its
vaccine is by the end of this month or early February, putting
it on track to roll it out in March.
A top adviser to the U.S. vaccine development program has
said that J&J's vaccine could show efficacy at or above 80%,
which would be below the efficacy of about 95% achieved in
trials of already authorized vaccines from Pfizer Inc
and Moderna Inc.
But unlike the Pfizer and Moderna vaccines that require two
injections, J&J's is a single shot and does not have the cold
storage requirements of the other vaccines.
"We...believe efficacy in the 80%+ range would suggest a
clear role for the product in the market," Chris Schott, a
pharmaceuticals analyst at JP Morgan, said in a recent note.
In an indication of the market's focus on COVID-19 vaccines,
European stocks dipped on Monday after news that Merck
was stopping development of its two candidates. Merck's program
trailed others, but it was still closely watched due to the
company's status as one of the most established players.


(Lewis Krauskopf)
*****

NASDAQ COMPOSITE: PEGGING IN THE RED ZONE? (0900 EST/1400
GMT)
The Nasdaq Composite has staged a massive rally off
its March 2020 trough. Indeed, the tech laden index has surged
around 105% in the past 211 trading days.
With this, the New High / New Low (NH/NL) index, a
measure of internal strength, has been pegging at especially
high levels:

The NH/NL index has now seen 42 straight daily readings of
greater than 90%. This is the longest such streak since a 46-day
run from March 1 to May 4, 2010.
Back then, the Composite had experienced a 100% thrust off
its March 2009 low over a 285 trading day period into an April
26 top. From there, with the NH/NL index then deteriorating, the
Composite collapsed nearly 20% over the next 47 trading days.
Of note, during the 2010 run above 90%, the NH/NL index
topped at 96.6%. So far, in this recent run, the high has been
96.4% last Thursday. Despite a new IXIC high on Friday, the
NH/NL index did tick down.
Even though, at this time, there has not been a multi-week
period of divergence between the Composite and the NH/NL index,
it remains to be seen if the Nasdaq has simply become so
overheated, that it may be vulnerable to another major cool
down.

(Terence Gabriel)
*****


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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)