The big banks are typically the first to report earnings, and those announcements are about to begin. The accelerating trend in vaccines, successful passage of the Biden administration's $1.9 trillion stimulus package, and optimism on infrastructure investment are all pushing consensus earnings expectations higher. Although the pandemic appears to be easing, the economy has undergone fundamental changes that appear to be permanent. Work and education have shifted to a hybrid model, and we anticipate continued accelerated investment in digitization. The year 2021 should also feature a reversal in 2020's "deadweight" sectors, such as Industrials and Energy, which were subtractive to overall prior-year earnings. Based on our multi-input model, we recently increased our estimate of S&P 500 earnings from continuing operations for 2021 to $176 from $171. Our revised 2021 EPS model assumes 28% growth from our static 2020 estimate; we had previously modeled 24% growth. Off the higher 2021 base, and on the assumption that positive economic momentum can be carried forward, we raised our estimate of S&P 500 earnings from continuing operations for 2022 to $201 from $195. Our revised 2022 EPS model assumes 14% growth from our 2021 estimate, in line with earlier expectations.

This edition features our outlook for the repair and remodeling market; the banking industry; Amazon's path ahead; and notes from Lumen, Canopy, and new coverage MongoDB.

March was an interesting month, to say the least. Some indices got slammed in the beginning of the month, rebounded until mid-month, headed lower again until about March 25, and then rebounded to close the month. Sector leadership was tilted toward defensive stocks, and even though some higher-beta sectors barely rose, the indices either eked out small gains or actually had a nice month. But it certainly didn't feel like it!

President Joe Biden is preparing to announce an infrastructure-rebuilding plan that he estimates will create up to 10 million clean energy jobs. The following areas of the economy stand to benefit from the government spending, which could total as much as $4 trillion. The first element of the plan is improving the country's infrastructure, from roads and bridges to water systems and electricity grids.

The Federal Reserve decided to maintain the federal funds rate at a rock-bottom 0.00-0.25% at its latest Open Market Committee meeting. The action (or non-action) had been expected, given the current high level of unemployment, but traders have recently been worried about the potential for inflation as the U.S. vaccine program progresses and the economy reopens. The vote was unanimous, and the majority of the central bankers are forecasting no changes in rates through at least 2023. The Fed also is maintaining its $120 billion/month asset-purchasing program in an attempt to keep long-term rates under control and markets functioning. In comments after the meeting, Fed Chairman Powell noted that the country has avoided the worst potential outcomes from the pandemic, in part due to a combination of fiscal and monetary policy. He added that jobs growth has picked up, and the Fed is now forecasting GDP growth of 6.5% for the year. But segments of the economy (leisure and hospitality, for example) remain under pressure, and "no one should be complacent" according to Chairman Powell. Our forecasts call for the yield curve to steepen slightly into 2022 as long-term rates drift higher toward 2.0%, which is still a historically low level.

The United States economy is full of innovation. It has to be. Manufacturing industries that dominated the economy decades ago - textiles, televisions, even automobiles, to a large degree - have moved overseas, where costs are lower. Yet the U.S. economy, prior to the pandemic, had expanded to record levels. And now, the U.S. Healthcare industry is mobilizing to improve COVID-19 testing, treatments and vaccines. Consider that U.S. GDP was approximately $1 trillion in 1930 but nearly $22 trillion at the end of 2019. That's growth of 22-times. Meanwhile, the U.S. population has grown less than 3-times during that time span, to 320 million from 120 million. The delta between GDP growth and population growth has been driven in large part by innovation. In addition, the value of listed corporations on U.S. stock exchanges at the end of 2020 was approximately $32 trillion, representing 41% of global equity market capitalization, while U.S. GDP represented only 25% of global GDP. The current low level of interest rates (the benchmark 10-year Treasury bond yield is 1.1%) and the relatively high level of the dollar both attest to the confidence that global investors have in the innovative U.S. economy.

Maybe Monday -- when all indices, small and large, and all 11 S&P sectors rose in unison -- was just a mirage. Or as a sportscaster used to say, "the fans rise as one." On Wednesday, we were back to what has been the norm in late 2020 and early 2021: weakness primarily in the Nasdaq and Nasdaq 100 (QQQ) pulling the S&P 500 down with it, but continued relative strength in small-caps and mid-caps.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

Interest rates at the long end of the yield curve have risen sharply and we anticipate they will head modestly higher over the next few quarters. The curve (2yr/10yr spread) has steepened from 82 basis points at the start of the year to 145 basis points. While the Fed will focus more on unemployment than inflation, and has pledged to keep short-term rates low, it has less influence over the long end of the yield curve. Bond investors at the long end of the yield curve are concerned inflation may spiral out of control, especially if Congress rolls out another massive spending plan. The rising long-term interest rates and steepening yield curve hold several implications for investors. One, higher rates raise valuations on equities, and this has caused the stock sell-off over the past few days. But the steeper yield curve also signals the U.S. economy may be rebounding sharply in a few months. And the wider spread between short-term and long-term bonds is beneficial for most of the Financial Services sector.

In early January, we wrote the following. "Don't look now, but interest rates at the long end of the curve are moving higher. With the whole curve historically low, does it really matter? Could it actually be bullish for certain sections of the stock market? Certainly not high-yield plays, but for those stocks that benefit from a faster growing economy? Remember those days? There are lots of questions but no definitive answers -- so watch price action to give us a clue.

We have highlighted (repeatedly) the current strong market breadth, even suggesting it might be too strong and in need of a reset. We've also talked about extremely overheated market sentiment, also in need of a nice reset as we see it.

A few weeks ago, we talked about the potential for a major U.S. Dollar Index (USD) bottom based on a number of technical factors. The greenback was close to major long-term chart support, the COT data (absolute and adjusted for open interest) was very favorable for the dollar, and the COT data for the euro (58% of the USD) was very unfavorable. Sentiment toward the dollar was also very poor while sentiment toward the euro was very bullish. Since then, the USD has bounced 2.3% -- so we have a start.

Stocks rose on Thursday, but gave up some of their midday gains, as investors weighed results from a range of major companies along with new employment and GDP data. The Labor Department reported that both first-time and continuing unemployment claims fell from the prior week, and came in below consensus forecasts. Meanwhile, the Commerce Department said that the U.S. economy expanded at a 4.0% rate in 4Q, slightly below the consensus forecast of 4.2%. For the full year, the economy contracted at a 3.5% annualized rate - the first full-year decline since 2009. On the earnings front, McDonald's posted disappointing 4Q sales and earnings, with international comp sales down 7.4%, reflecting the impact of coronavirus lockdowns in Europe. Tesla shares fell 3% after the automaker posted mixed fourth-quarter results and failed to provide specific sales guidance for 2021. The Dow rose 0.99%, the S&P 0.98%, and the Nasdaq 0.50%. Crude oil fell to $52 per barrel, while gold fell $4 to $1845 per ounce.

Capital One is a diversified financial-services holding company, primarily involved in credit card lending, auto lending, and commercial lending.