(Bloomberg) – Wall Street traders weighed in on a slew of corporate earnings and signs that the world’s largest economy is holding up, pushing stocks to their longest weekly rally in 2024.
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On the eve of the 37th anniversary of the “Black Monday” market crash, stock prices hit record highs as most major groups rose. The S&P 500 rose for the sixth straight week. A version of the index that gives Target Corp. the same influence as Microsoft Corp. also broke records on expectations that the gains will expand. Netflix jumped 11% on strong earnings. Apple rose 1.2% as sales of the latest iPhones surged in China. American Express fell 3.2% after lowering its sales forecast.
Most of the S&P 500’s earnings growth will continue to come from mega-cap stocks, with the Magnificent Seven’s third-quarter earnings expected to rise 18%, according to Bloomberg Intelligence. Other companies are expected to see only 1.8% profit growth, but earnings are expected to accelerate to double-digit growth in the first quarter of 2025.
“Earnings season is the start of the race, and despite some signals, things are looking strong,” said Liz Young-Thomas, head of investment strategy at SoFi. “That said, we are still in the early stages and approaching the final days before the election and the next Fed meeting. There is never a dull moment.”
Michael Hartnett, a strategist at Bank of America, said that with Donald Trump winning the U.S. presidential election and the chances of Republicans taking control of Congress increasing, investors are betting on former President Donald Trump’s 2016 He has begun to increase the assets that have increased following his victory.
Price movements over the past week show that banks, small-cap stocks and the dollar are “at the forefront of a bullish run in 2016,” Hartnett wrote in a note. Shortly after Trump defeated Hillary Clinton in November 2016, U.S. stocks and the dollar soared.
The S&P 500 rose 0.4%, setting a record for the 47th time in 2024. The Nasdaq 100 rose 0.7%. The Dow Jones Industrial Average was little changed. The Russell 2000 index of small companies underperformed on Friday, but is up nearly 2% this week.
The yield on the 10-year US Treasury note fell by 1 basis point to 4.08%. The Bloomberg Dollar Spot Index fell 0.2%. Crude oil fell by the most in more than a year in a week as the United States revived efforts to end conflicts in the Middle East and China’s oil demand fell. Gold exceeded $2,700.
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Mike O’Rourke of Jones Trading said in a note titled “Rotation Nation” that much of this week has been about the expansion of the bull market. Although technology has advanced, the group lags behind several other S&P 500 industries. He said a slowdown in inflation from mid-2024 onwards opens the door to rate cuts. And now, economic strength is accelerating this.
“Investors no longer need to flock to the size and safety of the Magnificent Seven,” O’Rourke said. “Ironically, due to its congestion, the Magnificent Seven stocks trade at more than twice the P/E ratio of the other 493 companies in the S&P 500. The Magnificent Seven Leaders Although the teams generally remain strong, substitutions were realistic. ”
Despite the S&P 500’s surge from one record to another this year, measures of investor sentiment show subdued mood given uncertainties surrounding the Federal Reserve, geopolitics and the US presidential election. It turned out that it was. But while optimism returned this week, the timing sends a bearish signal for the stock.
Ned Davis Research’s Daily Trading Sentiment Composite Index returned to the optimistic zone on Tuesday, and history suggests that whenever this happens in an election year, stocks will remain moderate through Election Day on Nov. 5 this year. The price continued to rise. Meanwhile, in mid-October, when sentiment was pessimistic, the benchmark index posted a median gain of 2.5% over the same period.
“The bottom line is that the recent return to optimism could weigh on markets heading into a close election,” said Ed Clissold, chief U.S. strategist at Ned Davis. said. However, he added, if political uncertainty increases and optimism weakens, this could set the stage for post-election rallies.
“We continue to see a positive environment for U.S. stocks,” said David Lefkowitz of UBS Global Wealth Management. “Earnings growth is accretive. Although the election result has added to the uncertainty, we do not believe potential policy changes resulting from the election will materially change the environment. Valuations are high in absolute terms. However, we believe that this is appropriate considering the macro environment.
Quincy Crosby of LPL Financial says investors and traders alike are very unlikely to fear missing out if the technology sector delivers weaker-than-expected numbers or softer guidance. he said.
“The pullback as we inch closer to overbought technical conditions enters a critical week for earnings and, more importantly, what the big tech companies are reporting and, more importantly, what the future holds for the big tech companies. “It could provide some support as we get closer to what we’re expecting,” he said.
Wolf Research’s Chris Seniek said the Magnificent Seven’s steep earnings revisions since the start of the year have raised the bar higher than expected compared to other S&P 500 companies.
“We think this group will probably need to win by a larger margin than last quarter to return to market leadership,” he said. “Similarly, we believe that reasonable expectations for the “other 493 stocks” lower the bar for upside surprises and support our call for market performance to continue to “broadcast” into year-end. ”
“Will the S&P 493 beat the ‘Magnificent Seven’?” This is a difficult call given how much the ‘Magnificent Seven’ companies have historically grown in sales, revenue and profitability. ” said Ed Yardeni, founder of the research firm of the same name.
However, he said Magnificent Seven shares are volatile and susceptible to price declines, primarily due to concerns about valuations and slowing growth.
Their one-year performance has generally matched or underperformed the S&P 500 and S&P 493 in the past, especially in late 2016 and from 2018 to 2019, when investors lightened their positions and rotated into the S&P 493. It happened several times. From 2021 to 2023, Yardeni said.
“The Magnificent Seven has been leading the way since mid-2023, but now the S&P 493 is starting to catch up,” he concluded.
“The sustainability of the equity bull market is improving,” said David Donabedian of CIBC Private Wealth US. “Take a hard look at the fundamentals. Third-quarter earnings are strong. Economic indicators continue to show growth. Retail sales were better than expected this week, showing that consumers are still spending. We see. And the market’s strong performance is widespread.”
Tesla will raise production targets and regulations in next week’s earnings call after its much-hyped CyberCab announcement failed to captivate investors and quell concerns about recent car sales. I am facing a question regarding the above issue.
Boeing will also need to appease investors, who are increasingly concerned about production delays, labor disputes and depleting financial resources.
Reports from United Parcel Service, Norfolk Southern Airlines and Southwest Airlines should shed light on the combined impact of Hurricane Helen and the three-day East Coast longshoreman strike on recent quarters is.
Company highlights:
Lamb Weston Holdings’ stock price rose after activist investor Jana Partners announced it had acquired a 5% stake in the company in a bid to encourage the french fry supplier to explore strategic alternatives. It skyrocketed.
Procter & Gamble posted sluggish sales for the second consecutive quarter, dragged down by minimal price increases and weakness in key areas such as skin care and baby care.
The SLB warned that spending growth among oil explorers has slowed in recent months as explorers have taken a cautious stance in the wake of falling oil prices.
Shares of Ally Financial fell after the auto lender gave a more pessimistic outlook for loan write-offs and lowered its net interest margin forecast as consumers struggled with high debt burdens. .
Verizon Communications, the largest wireless carrier in the United States, plans to buy some of US Cellular’s spectrum licenses for $1 billion in a bid to sell part of US Cellular’s portfolio.
Warren Buffett sells more Bank of America Inc. stock, but regulatory standards require prompt disclosure after the bank buys back enough of its own stock to bring its stake back above 10% exceeded 10%.
CVS Health Corp. has named David Joyner as its new chief executive officer, ending Karen Lynch’s tumultuous tenure at the pharmacy giant.
BMW AG is recalling nearly 700,000 vehicles in China due to a defective coolant pump, another setback for the German automaker, which has struggled with defects in other vehicles.
The main movements in the market are:
stock
As of 4 p.m. New York time, the S&P 500 was up 0.4%.
Nasdaq 100 rose 0.7%
The Dow Jones Industrial Average is little changed.
MSCI World Index rose 0.4%
S&P 500 Equal Weight Index up 0.3%
Bloomberg Magnificent 7 Total Return Index rose 0.5%
Russell 2000 index down 0.2%
currency
The Bloomberg Dollar Spot Index fell 0.2%.
The euro rose 0.3% to $1.0864.
The British pound rose 0.2% to $1.3042.
The Japanese yen rose 0.4% to 149.54 yen to the dollar.
cryptocurrency
Bitcoin rose 2.5% to $68,591.88
Ether rises 2% to $2,649.62
bond
The 10-year Treasury yield fell 1 basis point to 4.08%.
German 10-year bond yields fell 3 basis points to 2.18%.
UK 10-year bond yields fell 3 basis points to 4.06%.
merchandise
West Texas Intermediate crude oil fell 1.8% to $69.39 a barrel.
Spot gold rose 1% to $2,719.59 an ounce.
This article was produced in partnership with Bloomberg Automation.
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