Tag Archives: Wall Street indices

Wall Street Indices Drop on Weak U.S. Data

Wall Street Indices Drop on Weak U.S. Data:
American stocks declined after releasing weaker-than-expected economic data,
raising concerns about U.S. corporate earnings projections.
This came as long-term inflation expectations surged to levels not seen since 1995.

 

Content
Investor Concerns
 Signal of the Beginning of a Correction
 Performance of Indices and Markets
 Decline in Consumer Spending
 Profit Taking in U.S. Stocks
 Hedge Funds

 

 

Investor Concerns Over Economic Reports

Economic reports issued on Friday covering consumer sentiment,

housing,g, and services sectors raised concerns among investors when the Federal Reserve is holding off on cutting interest rates.
The S&P 500 index fell by more than 1.5% during that period, while bond prices rose.
In addition, options worth $2.7 trillion linked to stocks and exchange-traded funds expired,
often leading to increased price volatility.
The rally in shares of COVID-19 vaccine manufacturers,
following trading on reports about a new coronavirus study in China,
also deepened these fluctuations.

 

Is This a Signal of the Beginning of a Correction in the U.S. Stock Market?

Keith Lerner from Truist Advisory Services believes that the convergence of these factors—

especially in an overvalued market—which could trigger minor changes.
Meanwhile, Katie Kaminski from AlphaSimplex Group described the day as “a typical day marked by a decline in risk appetite.”
 In another statement, Andrew Brenner from NatAlliance Securities asked,
“Is this the beginning of a correction?”
He added that concerns over weak economic expectations render inflation secondary,
noting reports of a new virus discovered in bats. He remarked,
“Does anyone want to sell Treasury bonds before the weekend?”

 

Performance of Indices and Markets

The S&P 500 index declined by 1.7%, while the Nasdaq 100 fell by 2.1%.
The Dow Jones Industrial Average dropped by 1.7%,
led by a decline in UnitedHealth Group’s shares,
while the Dow Jones Transportation Average fell by 2.6% and the Russell 2000 by 2.9%.
The “Seven Giants” stock measure also lost 2.5% of its value.
 The late surge in the Treasury bond market also caused
the 10-year bond yield to drop for several consecutive
weeks as traders sought safe-haven assets amid falling stock and oil prices;
the yield declined by 8 basis points to reach 4.43%, while the dollar index rose by 0.2%.

 

 

 

 

Concerns Over Declining Consumer Spending

Jina Bolvin from Bolvin Wealth Management Group
stated that the uncertainty surrounding monetary policy and declining retail sales expectations
highlighted by Walmart’s consumer spending tracking
may provide the impetus for a healthy market correction despite
strong underlying fundamentals supporting continued gains.
 Bolvin noted that profit growth has increased, and although
The Federal Reserve might remain in a holding pattern, so the next step could be a rate cut.
She added, “Unexpected consumer data could impact spending, helping alleviate inflationary pressures.”

 

Profit Taking in U.S. Stocks

Mark Hackett from Nationwide believes that the markets
are undergoing a period of profit-taking after two years of outstanding performance.
He pointed to an interesting shift in market leadership that could drive markets upward,
as risk-return dynamics attract investor attention compared to value and global markets.
 Ed Kliesold and Thana Nguyen from Ned Davis Research also noted
that most instances of profit-taking in the U.S. stock market have
ended with the market continuing to rise, except for the bear market in 1962.
Historical trends suggest profit-taking will persist before any upward movement based on inflation and earnings.

 

Hedge Funds’ Stance

Meanwhile, according to strategists at Goldman Sachs Group,
hedge funds have reduced their net positions in most of the “Seven Giants” stocks.
The team, comprising Ben Snyder and Jenny Ma,
explained that “recent deposits show greater selectivity in choosing sectors and popular themes.”
Despite this reduction, six companies among the mega-cap group
still hold high positions with hedge funds, except Tesla.
 More broadly, short-selling positions in the average stocks
on the S&P 500 have reached their highest level since 2020,
now at 2% of market capitalization.

 

Wall Street Indices Drop on Weak U.S. Data

Tech Giants Propel Wall Street Indices Toward Record Highs

Tech Giants Propel Wall Street Indices Toward Record Highs: Wall Street indices are on the verge of record highs,
driven by significant gains in major technology stocks.
Optimism surrounding artificial intelligence and a series of strong earnings
from leading Tech Giants Propel Wall Street closer to its all-time peak.

 

Content

Upward Momentum

Rising Investor Concerns

Warnings About Overvaluations

Market Performance

Response to Trump’s Policies

Positive Outlook

Expectations for 2025

Monitoring the New Administration

 

 

 

Upward Momentum

The stock market’s upward momentum has continued this year,
with the S&P 500 briefly surpassing the 6100-point mark.
Netflix shares rose by approximately 10%, driven by the largest subscriber increase in its history.
Nvidia led the gains among major companies,
while Oracle shares jumped more than 6.5% after announcing a $100 billion joint venture with SoftBank and OpenAI.

This project, unveiled with the involvement of former President Donald Trump,
underscores the promising outlook for artificial intelligence developments driving the current market rally.

Steve Sosnick, from Interactive Brokers, stated,
“The promise of substantial funding for AI projects, whether fully realized or not,
is enough to reignite investor enthusiasm for this technology and its associated industries.”

 

Rising Investor Concerns

Despite recent efforts to diversify the market and include more companies beyond the tech giants,
many stocks within the S&P 500 have experienced underperformance, raising significant concerns among investors.

The primary worry lies in the market’s overall weak performance,
compounded by unjustifiably high valuations and the sharp rise in AI-related stock prices.
These factors have increased caution regarding potential sharp market corrections.

Optimism around AI and strong corporate earnings continues to act as a positive force,
propelling the market to record highs, albeit slower and more cautiously.

 

Warnings About Overvaluations

Jamie Dimon, CEO of JPMorgan, warned that the U.S. stock market might be overvalued,
stating, “Asset prices appear somewhat elevated.”
He emphasized on CNBC that strong, positive results are needed to justify these valuations.

 

Market Performance

S&P 500: Rose by 0.6%, Nasdaq 100: Gained 1.3%, Dow Jones Industrial Average: Increased by 0.3%.
The “Magnificent Seven” stocks (Meta, Microsoft, Apple, Nvidia, Amazon, Alphabet, Tesla) increased by 1.3%,
while the Russell 2000 declined by 0.6%.
Shares of Travelers Companies and Procter & Gamble posted notable gains,
supported by strong financial results, easing concerns about the market’s broader underperformance.

Meanwhile, the 10-year U.S. Treasury yield rose by two basis points to 4.6%,
and the Bloomberg Dollar Index showed volatility.

Response to Trump’s Policies

Mark Hackett, from Nationwide, noted that markets are responding positively to former President Donald Trump’s initial policies.
He commented, “Investors seem to share a pre-election level of enthusiasm,
with relief over tariff reduction announcements and the start of the earnings season.”

Matt Maley from Miller Tabak highlighted that a successful earnings season could prolong the current rally.
However, he stressed that the market needs more than “exceeding expectations” to progress further.

 

Positive Outlook Despite High Interest Rates

Investment strategists at BlackRock, including Jean Boivin and Wei Li, remain optimistic, stating,
“We continue to adopt a positive stance on risk and expect earnings to support stocks.”
They added, “Even in a high-interest-rate environment,
equities can continue to rise as long as economic fundamentals remain solid.”

 

Expectations for 2025

Following gains of 24% in 2023 and 23% in 2024,
the S&P 500 has questioned whether it can achieve similar performance this year.

Jeff Schulze from ClearBridge Investments noted,
“Consecutive annual gains exceeding 20% for the index do not necessarily indicate an imminent decline.
Historically, markets often deliver strong, albeit more moderate, returns in the subsequent years.”

He also emphasized that recent earnings growth has been concentrated in a few major stocks.
Schulze predicted that 2025 would see broader earnings participation,
improving the relative performance of small- and mid-cap stocks and undervalued companies.

 

Monitoring the New Administration and Its Impact on Markets

Solita Marcelli, from UBS Global Wealth Management, stated that the new administration’s actions are under close investor scrutiny.
She explained, “While we closely monitor developments,
investors should stay focused on the fundamentals that continue to support U.S. equities.”

She added, “We favor technology, utilities, and financial sectors without focusing on individual companies.
We also see value in adopting structured strategies to address short-term volatility.”

 

Tech Giants Propel Wall Street Indices Toward Record Highs

Wall Street Indices Bounce Back on Renewed Buying

Wall Street Indices Bounce Back on Renewed Buying: Wall Street indices experienced a notable recovery
following a new wave of stock purchases after prices dropped.
This rebound came after a sell-off triggered by the Federal Reserve’s reassessment of interest rate cut expectations.

 

Content

Stock and Bond Performance

Earnings Expectations

Financial Sector Earnings Season

Positive Signals for Buying

Bond Yields and Their Impact

 

 

 

 

Stock and Bond Performance in the Current Market Outlook

Shares of about 380 companies in the S&P 500 index rose,
helping the index recover from losses of approximately 1% early Monday.
Energy companies contributed to the recovery, supported by rising oil prices,
while banking stocks gained ahead of the financial earnings season.
However, tech giants like Nvidia and Apple saw limited declines.

Bonds showed minor movements following earlier declines,
driven by reduced expectations of significant interest rate cuts this year amidst persistent inflationary pressures.
 Chris Larkin of E*Trade, a subsidiary of Morgan Stanley, commented,
“Although this week’s lower-than-expected inflation data may not push the Federal Reserve

to implement another rate cut this month, it could help ease some negative momentum.
A strong start to the earnings season could achieve the same effect.”

 

Earnings Expectations

 Kallie Cox of Ritholtz Wealth Management believes that analysts have significantly lowered earnings expectations,
but the extent of this reduction is unusual.
She suggests that upcoming reports over the next few weeks could play a role in stabilizing the market.

Cox added:
 “If there’s a lesson we can learn, it’s that earnings remind us of how we got to this point.
Recognizing how significant this is for the current economic situation is important.
High expectations caused setbacks,
but this decline could attract more buyers simply because economic fundamentals remain strong.”

The S&P 500 index rose by 0.2%, while the Nasdaq 100 declined by 0.3%.
Meanwhile, the Dow Jones Industrial Average increased by 0.9%.
In contrast, Bloomberg’s “Magnificent Seven” index of major tech stocks,
including Apple, Nvidia, Amazon, Alphabet, Meta, Microsoft, and Tesla, fell by 0.4%.
The Russell 2000 index, which tracks smaller companies, rose by 0.2%.

 

 

 

 

 

 

Financial Sector Earnings Season: Expectations and Insights

The financial sector earnings season kicks off this week,
Major banks like JPMorgan and Wells Fargo are expected
to report consistent gains from trading revenues and investment banking operations.
These revenues have helped offset declines in net interest income due to higher deposits and weaker loan demand.

Attention will also focus on banks’ forecasts for 2025,
especially as the Federal Reserve signals fewer rate cuts this year,
which could negatively impact future earnings growth.

Michael Landsberg of Landsberg Bennett Private Wealth stated:
“Major banks often provide valuable insights into what we can expect from consumer-focused companies,
which will announce their earnings later this season.
If credit card usage is high, it is often a positive indicator for companies selling directly to consumers.”

Meanwhile, Meghan Horneman of Verdence Capital Advisors noted:
“Although economic growth has remained resilient in the face of persistent inflationary pressures,
we expect a growth slow during 2025.”
She added, “Current 2025 earnings projections might be overly optimistic.”

Horneman emphasized the importance of closely monitoring corporate leaders’ comments on inflation,
their outlook on the labor market, consumer spending patterns,
and the potential impact of management changes on future earnings.

This earnings season is expected to see historic volatility.
Options traders forecast that individual stocks in the S&P 500 will move an average of 4.7% in either direction after earnings announcements.
According to Bank of America strategists, this represents the largest single-day moves recorded in earnings history.

In a Monday note, Savita Subramanian, Head of U.S. Equity and Quantitative Strategy, wrote:
“We believe this earnings season will once again present a golden opportunity for stock selection.”

Positive Signals for Buying

HSBC strategists, led by Max Kettner, observed mild buy signals in market sentiment and repositioning indicators.
They suggested that this week’s surprises in U.S. economic data,
such as inflation and retail sales figures, could present buying opportunities for high-risk assets.
 The strategists noted, “Sometimes, bad news can be good news for the market.”

 

Bond Yields and Their Impact on the Stock Market

The stock market has shown strong reactions to economic news since late 2024
the S&P 500 index has moved at least 1% in either direction
in 8 of the last 15 trading sessions since the Federal Reserve’s decision on December 18.

Michael Kantrowitz, Chief Investment Strategist at Piper Sandler,
emphasized that bond yields have become the primary indicator
for interpreting stock market sentiment more than any point in the last 30 years.
He suggested that market weakness is more likely to stem from high interest rates than weak growth,
a dynamic that began in 2022 with the most significant shift in stock valuation models since the 2007 peak.

Goldman Sachs strategists highlighted a sharp decline in funding spreads this year,
reflecting shifts in institutional investors’ stock allocations as the market re-evaluates the Federal Reserve’s rate trajectory.

According to the strategists, the funding spread
a measure of long-term exposure demand through financial derivatives like swaps,
options, and futures—fell to about 70 basis points from around 130 basis points in late December.
 In a client note, John Marshall’s team at Goldman Sachs wrote,
“In our experience, significant short-term movements in funding spreads
always indicate changes in professional investors’ demand trends.
We believe pension funds, asset managers, hedge funds,
and trend-following managers have been sellers over the past few weeks.”

 

Wall Street Indices Bounce Back on Renewed Buying

Tech Stocks Drive Wall Street Indices

Tech Stocks Drive Wall Street Indices:
Wall Street indices received strong support at the start of the first full trading week of 2025,
thanks to the exceptional performance of leading global tech stocks.
On the other hand, the dollar reduced its losses after President-elect Donald Trump
announced that his tariff plans would not be scaled back.

While buying at lower prices boosted the gains of the most influential stocks in the S&P 500 index,
most of the benchmark’s stocks saw slight declines.

 

Content

Nvidia

Short-Term Tactical Rally

2025 Outlook

Indices and Stocks Performance

Other Market Changes

Volatile Market

Cautious Approach to Rate Cuts

Favorable Long-Term Outlook

 

 

 

 

NVIDIA Hits Record Levels

NVIDIA’s shares reached an all-time high ahead of CEO Jensen Huang’s anticipated speech.
Meanwhile, banking stocks rose due to optimism over potential regulatory easing
following Michael Barr’s resignation from his position as Vice Chair for Supervision at the Federal Reserve.

These developments impacted the bond market, as weaker long-term bond performance led to a yield curve inversion,
with the 30-year Treasury yield reaching its highest level since late 2023.

 

Short-Term Tactical Rally

Scott Rubner of Goldman Sachs highlighted signs of a short-term tactical rally in U.S. stocks,
driven by institutional money flows and the absence of selling from systematic funds following market trends.
Similarly, Andrew Tyler of J.P. Morgan Chase noted that while risks to this rally are increasing,
a sharp decline remains “highly unlikely” amid strong economic growth.

Mark Hackett of Nationwide emphasized that the recovery
observed on Friday and Monday reflects “the strength of buy-the-dip mentality.”
He added that investors continue to rely heavily on tech stocks to achieve returns.

 

2025 Outlook

Hackett suggested that 2025 might not deliver easy double-digit gains solely through investments in S&P 500-listed companies.
Success in this market will require greater discipline and creativity from investors.

 

Indices and Stocks Performance

The S&P 500 index rose by 0.6%, followed by a 1.1% increase in the Nasdaq 100 index,
while the Dow Jones Industrial Average saw little change.

American Airlines Group shares surged due to three analyst upgrades.

Citigroup shares jumped, supported by bullish bets.

Tencent Holdings ADRs declined after being added to the U.S. Chinese Military Blacklist.

 

 

 

 

Other Market Changes

The U.S. 10-year Treasury yield rose by two basis points to 4.62%.

The Bloomberg Dollar Index fell by 0.6%.

The Canadian dollar maintained gains following Prime Minister Justin Trudeau’s resignation after more than nine years in office.

Bitcoin exceeded the $100,000 mark, while oil prices halted a five-session winning streak.

 

Volatile Market

Lori Calvasina of RBC Capital Markets observed that investor enthusiasm
in the stock market has started to “correct itself.”
as sentiment and positioning indices retreated at the end of the year.
In a note, she stated: “While this decline does not indicate that the recent market slump has ended,
We believe it will be positive news for the stock market in the long term.”

Paul Nolte of Murphy & Sylvest Wealth Management expects 2025 to be volatile,
with large price swings presenting opportunities for buyers and sellers.

Despite the S&P 500’s December decline, investors remained net buyers across nine of the 11 sectors,
according to Chris Larkin of E*TRADE, a Morgan Stanley subsidiary.
Larkin added: “While some purchases in utilities and real estate reflect defensive strategies,
The strength in consumer discretion, led by purchases in Tesla and Amazon, shows a continued appetite for risk.”

 

Cautious Approach to Rate Cuts

Investors are also awaiting Friday’s jobs report, which is expected to show reduced hiring,
signaling the end of a moderate yet healthy labor market.

Nevertheless, the data is unlikely to shift Federal Reserve officials’ stance
on slowing the pace of rate cuts amid a strong economy and gradually diminishing inflation.

Lisa Cook, Federal Reserve Governor,
stated on Monday that policymakers would adopt a more cautious approach
to rate cuts due to a robust labor market and persistent inflationary pressures.

According to Morgan Stanley strategists led by Michael Wilson,
U.S. stocks have become increasingly sensitive to interest rates,
with the 10-year Treasury yield surpassing 4.5%, narrowing market movements.

In a note, they wrote: “For strong economic data to once again
lift stocks even in the face of rising interest rates,
we need more compelling evidence of improving economic activity.”

 

Favorable Long-Term Outlook

Despite the slowdown in rate cuts,
Solita Marcelli of UBS Global Wealth Management sees a favorable long-term market outlook.
Key drivers include lower borrowing costs, resilient U.S. economic activity,
expanding corporate earnings, increased liquidity in AI-related stocks,
and potential growth in capital market activity under Trump’s second administration.

Marcelli predicted the S&P 500 could reach 6,600 points by the end of 2025,
advising non-professional investors to take advantage of near-term
disruptions to add more U.S. stocks to their portfolios using structured strategies.

 

Tech Stocks Drive Wall Street Indices

Wall Street Indices Rise Amid Global Interest Rate Decisions

Wall Street Indices Rise Amid Global Interest Rate Decisions: U.S. stock indices closed broadly higher
on Monday as traders prepared for interest rate decisions from major central banks worldwide later this week.
 The S&P 500 rose by 0.4%, while the Nasdaq 100 climbed 1.5% to reach another record high.
Broadcom and Tesla were among the session’s biggest gainers.
The 10-year Treasury yield remained unchanged at 4.40%, while Bitcoin prices reached a new record high.

 

Content Overview

United States

Focus on the Fed Decision

Tensions in Canada and Europe

Further Decline in China

 

 

 

United States

Sentiment in the U.S. was relatively positive,
with a widely anticipated quarter-point interest rate cut by the
Federal Reserve is viewed as providing additional support and extending stock outperformance.
This optimism contrasts with losses in Asia and Europe on Monday
following weaker-than-expected retail data from China.

In the U.S., Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley,
stated that short-term momentum “may depend on what Federal Reserve Chair Jerome Powell
says and whether retail sales or the Personal Consumption Expenditures Index surprise the market.”
 He added that most of December’s stock market gains historically occur in the second half of the month,
noting that the S&P 500 has delivered a positive net return 78% of the time since 1957.

 

Focus on the Fed Decision

Traders are currently analyzing new economic data. On Monday,
reports showed that U.S. services sector activity has expanded fastest since October 2021.
Meanwhile, a measure of factory activity in New York State fell by the most since May.

However, the main focus remains on the Federal Reserve’s decision on Wednesday,
which will be followed by monetary policy announcements from Japan,
the Nordic countries, and the United Kingdom later this week.
 Tony DeSpirito, BlackRock’s Chief Investment Officer for fundamental equities,
said on Bloomberg Television: “Even if we get a significant rate cut,
it will be because the Fed sees underlying strength in the economy.
This suggests that the rise in U.S. stocks may continue to broaden.”

Meanwhile, Monday’s Bloomberg Dollar Index fluctuated between modest gains and losses.
After rising by more than 6% this year, Wall Street has begun to feel the strain of the dollar,
as Donald Trump’s policies and rate cuts are seen as factors
putting pressure on the currency toward the latter part of 2025.

 

 

 

 

Tensions in Canada and Europe

The Canadian dollar dipped slightly following reports that Prime Minister Justin Trudeau plans to appoint Dominic LeBlanc
as Canada’s finance minister.
LeBlanc will replace Chrystia Freeland, who resigned due to disagreements over how to prepare for a Trump administration.

Elsewhere, German lawmakers approved a measure paving the way for elections within two months,
supporting Chancellor Olaf Scholz’s plan to end his struggling administration early.
 Meanwhile, private sector activity in the Eurozone contracted less than expected,
with a larger-than-anticipated contribution from the services sector.

French bonds underperformed their peers after Moody’s downgraded the country’s credit rating.
Additionally, the Bank of France lowered its domestic growth forecasts,
citing political instability as a drag on household and business confidence.

 

Further Decline in China

In China, retail sales growth unexpectedly slowed in November despite signs of improvement in the housing market.
The data added to traders’ disappointment last week when Beijing pledged
to boost consumption but failed to provide details regarding fiscal stimulus.

Charu Chanana, Chief Investment Strategist at Saxo Markets in Singapore,
stated that retail sales data “reflects the dire situation there,
where stimulus efforts have prioritized optics over meaningful economic improvements.”
He added: “Even for a tactical recovery,
more is needed after a series of false starts and the looming threat of tariffs.”

Meanwhile, oil prices fell after the latest Chinese economic data intensified
concerns about weakening demand in the world’s largest crude importer.

 

Wall Street Indices Rise Amid Global Interest Rate Decisions

Wall Street Indices Hit Record Highs on Powell’s Positive Remarks

Wall Street Indices Hit Record Highs on Powell’s Positive Remarks: U.S. stock indices reached new record highs,
driven by Federal Reserve Chairman Jerome Powell’s statements emphasizing the remarkable strength of the U.S. economy.
Meanwhile, the euro experienced significant volatility following the fall of the French government after a no-confidence vote in parliament.

 

Content

Strong Performance of Technology Stocks

Economic Activity Increases

A Risky Market Environment

A More Hazardous Market in the Long Term

Labor Market Under the Microscope

Continued Superiority of U.S. Stocks

 

 

 

 

Strong Performance of Technology Stocks Drives Indices to New Highs

Significant gains in major technology stocks pushed the S&P 500 Index to its 56th record close this year,
while the Nasdaq 100 rose by more than 1%. Nvidia was the key driver of the “Magnificent Seven” index,
which includes Meta, Amazon, Microsoft, Tesla, Nvidia, Alphabet, and Apple.
The index has gained nearly 65% year-to-date.
At the same time, Salesforce and Marvell Technology stocks continued to climb,
reinforcing expectations that both companies would benefit further from rapid growth in the artificial intelligence sector.
Speaking at the New York Times DealBook Conference,
Powell highlighted that Federal Reserve policymakers can afford to be cautious in adjusting interest rates toward a neutral level.
This level neither stimulates nor restrains the economy.

 

Economic Activity Increases

Krishna Guha of Evercore described Powell’s remarks as “slightly hawkish” but emphasized
that they continue to bolster market confidence in a December rate cut, which remains the baseline scenario.

The Beige Book, one of Powell’s favored economic indicators, showed a slight increase in economic activity in November,
accompanied by growing optimism among businesses regarding future demand.
In terms of indices, the S&P 500 rose 0.6%, the Nasdaq 100 gained 1.2%,
and the Dow Jones Industrial Average added 0.7%.
In the bond market, 10-year U.S. Treasury yields fell by 4 basis points to 4.18%.
In Europe, French bond futures held onto previous gains after
far-right leader Marine Le Pen joined a left-wing coalition to topple the government,
heightening political tensions that had been weighing on French assets for months.

 

A Risky Market Environment

Steve Sosnick of Interactive Brokers noted that the current market environment is “risky.”
Despite some investors taking precautionary measures like buying protection against a 10% correction in the S&P 500,
such a correction has not occurred in months.
Sosnick pointed out that the “cost of hedging” against a 10% correction has reached its highest level in three years.

George Smith of LPL Financial believes the current momentum in stocks may persist,
as December has historically been a positive month for markets.
Data since 1950 shows that 74% of the time, December delivers the best monthly returns.
However, Smith cautioned against potential short-term weaknesses due to escalating geopolitical threats and a slower-than-expected rate-cut cycle.

Meanwhile, J.P. Morgan Chase’s market analysis team, led by Andrew Tyler,
expressed tactical optimism through year-end, citing favorable macroeconomic conditions,
earnings growth, and continued Federal Reserve support.
They added, “The current market momentum is worth leveraging, with minimal downside risks through mid-January.”

 

 

 

 

A More Hazardous Market in the Long Term

Doug Ramsey of Leuthold Group highlighted in a recent note that, paradoxically,
the substantial gains of 2024 have made the market appear riskier for long-term investors, though potentially safer for short-term speculators.

Leuthold’s Major Trend Index (MTI), which accounts for various metrics, remains in a “high neutral” state.
However, all its sub-indicators closed last week with strong bullish readings.
Short-term positions, chasing highs, and automated buying flows characterize a “go-with-the-flow” market environment,
though this could shift entering the new year.

Callum Thomas of Topdown Charts remarked, “This is not an ideal structure;
investors and speculators have been lured into a perpetually rising market.”

 

Labor Market Under the Microscope

Cali Cox of Ritholtz Wealth Management observed that investors are placing
significant hopes on rising commodity prices but advised caution after November’s remarkable surge.
Cox emphasized that “the bar for success has risen considerably for an economy still grappling with volatility.”

He added, “Despite major shifts in expectations over the past two months,
there’s yet to be any sustained and clear momentum in economic data.
Projections remain critical, with the labor market continuing to be under scrutiny.”

Mark Hackett of Nationwide underscored that consumer resilience will be key to sustaining market gains.
He identified labor market health as one of the most reliable indicators for predicting consumer spending.

Hackett noted, “Markets are currently driven by a mix of technical and fundamental factors,”
adding that “the consistent upward momentum frustrates bearish traders,
creating a virtuous cycle where buying activity feeds further buying.”

He concluded, “While questions linger about sustainability through 2025 amid high valuations and ambitious forecasts,
this momentum is unlikely to waver in the near term.”

 

Continued Superiority of U.S. Stocks

Investor appetite for U.S. stocks has shown no signs of waning this year.
The S&P 500 has hit multiple record highs, climbing over 25%,
fueled by technological stock gains and a strong preference for American assets.
This momentum continued after Donald Trump’s election, raising hopes for tax cuts and deregulation.

BlackRock Investment Institute believes this trend could persist,
attributing to the U.S.’s ability to leverage “mega forces” that drive corporate earnings.
Favorable growth projections, potential tax cuts, and reduced regulatory burdens support this.

The institute noted that some valuation metrics—such as price-to-earnings ratios and equity risk premiums,
appear strong relative to historical trends but may not tell the whole story.
They compared today’s index to the past to “comparing apples to oranges.”
Furthermore, valuations tend to matter more for long-term returns than short-term performance.

BII also highlighted the transformative potential of artificial intelligence,
which is expected to benefit U.S. stocks more than their global counterparts,
such as European equities. For this reason, BII recommends prioritizing investments in American stocks.

The note concluded, “While risks exist, the market demonstrates resilience.
key factors that could alter this outlook include a rise in long-term bond yields or escalating trade protectionism.”

 

Wall Street Indices Hit Record Highs on Powell’s Positive Remarks

Netflix Earnings and Apple Sales Boost Wall Street Indices

Netflix Earnings and Apple Sales Boost Wall Street Indices: Wall Street stock indexes saw a significant
rise as traders continued to analyze major company earnings, leading to the longest weekly rally of 2024.
These gains were driven by strong earnings reports from Netflix and Apple, bolstering the market’s upward trend.

 

Table of Contents

Strong Performance of Stock Indexes

Netflix Earnings and Apple Sales

Magnificent Seven” Profits Strengthen the Rally

Impact of the U.S. Elections on Markets

Performance of U.S. Stock Indices

Future Outlook and Cautious Sentiment

Economic Outlook Post-Election

Positive Environment for U.S. Stocks

Challenges for the Technology Sector

Challenges for the Magnificent Seven Index

Economic Growth and Market Sustainability

 

 

 

 

Strong Performance of Stock Indices

Wall Street traders led stocks into the longest weekly rally of 2024 as they reviewed company earnings
and signals indicating the resilience of the world’s largest economy.
On the 37th anniversary of Black Monday (when the market crashed in 1987),
stock indexes reached all-time highs, with gains across most major sectors.
The S&P 500 rose for the sixth consecutive week,
while an equal-weight index that gives Target the same weight as Microsoft hit a record high,
as investors hoped the rally would broaden.


Netflix Earnings and Apple Sales

Netflix shares surged 11% after the announcement of strong earnings,
while Apple shares rose 1.2% due to increased sales of its latest iPhones in China.
In contrast, American Express shares fell 3.2% after lowering its revenue forecasts.

 

Magnificent Seven” Profits Strengthen the Rally

Most of the profit growth in the S&P 500  index comes from the large-cap
companies known as the Magnificent Seven (Apple, Tesla, Microsoft, Nvidia, Alphabet, Meta, Amazon).
According to Bloomberg Intelligence, these companies are expected to report an 18% earnings growth in the third quarter.
In comparison, other companies in the index are expected to see only a modest 1.8% increase.

 

Impact of the U.S. Elections on Markets

As the U.S. presidential elections draw closer and the chances of Donald Trump winning increase,
investors have shifted their money toward assets that benefited from his victory in 2016,
such as bank stocks and small-cap companies.
According to a memo from Bank of America, banks, small-cap companies,
and the dollar was among the biggest beneficiaries of stock gains in 2016 after Trump’s victory.

 

Performance of U.S. Stock Indices

The S&P 500  rose by 0.4%, marking its 47th record close in 2024.
Meanwhile, the Nasdaq 100 climbed 0.7%, while the Dow Jones remained relatively unchanged.
The Russell 2000 small-cap index underperformed on Friday but gained around 2% weekly.

 

 

 

 

 

 

 

Future Outlook and Cautious Sentiment

In a memo titled “Nation of Rotation,” Mike O’Rourke of JonesTrading
noted that the most recent gains were due to the broadening rally across different industries.
While technology stocks advanced, they still lagged behind other sectors in the S&P 500.
As inflation has slowed since mid-2024, interest rate cuts are expected to support economic growth and boost overall market sentiment.

 

Economic Outlook Post-Election

Although optimism returned to the markets this week,
uncertainty surrounding the U.S. elections continues to affect overall sentiment.
The Ned Davis research index, which measures trading sentiment,
shows that each time optimism rises in an election year, stock performance is average during the election period.
However, the market may experience a post-election rally if political uncertainty persists.

 

Positive Environment for U.S. Stocks

David Lefkowitz of UBS Global Wealth Management stated that
the environment remains favorable for U.S. stocks, noting that earnings growth is expanding significantly.
While the election adds a layer of uncertainty,
it is unlikely to drastically change the overall market environment.

 

Challenges for the Technology Sector

As investors await results from major tech companies,
Quincy Krosby from LPL Financial noted that a slight pullback in performance
could provide some support as the earnings season approaches.
Meanwhile, Chris Senyek from Wolfe Research suggested that major companies must
outperform elevated earnings expectations to maintain market leadership.

 

Challenges for the Magnificent Seven Index

Ed Yardeni, founder of the research firm bearing his name,
raised questions about whether the S&P 439 index (which excludes the Magnificent Seven) could outperform it.
While the Magnificent Seven have shown strong performance,
their stocks have been volatile due to concerns about valuations and slowing growth rates.

 

Economic Growth and Market Sustainability

David Donabedian from CIBC Private Wealth US said, “The sustainability of the bull market in stocks is improving.”
He noted that third-quarter earnings were strong, and economic data continues to point to growth.
Additionally, retail sales this week exceeded expectations,
indicating that consumers are still spending and the market’s positive performance is expanding.

Looking ahead to next week, Tesla faces challenges during its earnings call.
Investors expect answers regarding production goals and regulatory issues,

particularly after the much-promoted Cyber Cab (self-driving taxi)

failed to inspire investors and ease concerns about recent vehicle sales.

Meanwhile, Boeing will need to reassure investors who are increasingly worried about production delays,
labor disputes, and depleted financial resources. Reports from United Parcel Service,
Norfolk Southern Corp and Southwest Airlines are expected to reveal
the combined impact of Hurricane Helen and a three-day port
workers’ strike on the East Coast during the last quarter.


Netflix Earnings and Apple Sales Boost Wall Street Indices

Technology Stocks Weigh on Wall Street Indices

Technology Stocks Weigh on Wall Street Indices: The S&P 500 index fell by 1% after a four-week streak of gains,
as heavy selling in significant tech stocks dragged Wall Street indices down.
This decline was also driven by increasing geopolitical concerns

and speculation that the Federal Reserve might reduce the scale of interest rate cuts next month.

 

Content

S&P 500 Index

Impact of Geopolitical Tensions

Performance of Tech Stocks

Optimism in the Job Market and Economy

Start of Earnings Season

 

 

 

 

S&P 500 Index and Tech Stocks

The S&P 500 index dropped by 1% after a four-week rally.
Shares of Alphabet (Google’s parent company) fell by 2.4%
following a court ruling, developers can create competing marketplaces for the Google Play Store.
Additionally, Brent crude oil prices surged above $80 per barrel amid escalating tensions in the Middle East.
U.S. Treasury bonds continued to decline, with the 10-year bond yield rising to 4%.

 

Impact of Geopolitical Tensions

Chris Larkin from E*TRADE, a subsidiary of Morgan Stanley,

noted that Friday’s strong jobs report reduced the likelihood of a 50-basis-point interest rate cut in November.
It also increased the chances that the Federal Reserve might keep rates unchanged if economic data continues to outperform.
Dave Sekera from Morningstar warned that further geopolitical escalation
could encourage a shift toward safe-haven investments in value stocks at the expense of growth stocks,
suggesting that energy sectors may benefit in such scenarios.

 

Performance of Tech Stocks

On Monday, all major sectors in the S&P 500 fell, except for the energy sector.

The “Magnificent Seven” index—comprising Amazon, Tesla, Alphabet, Meta, Nvidia, Apple, and Microsoft—declined by 1.9%.
Amazon’s shares dropped by 3.1% after Wells Fargo downgraded its stock rating.
At the same time, Apple shares fell by 2.3% following a warning from
a Jefferies analyst said investors’ expectations for the new iPhone are overly optimistic.
In contrast, Nvidia bucked the trend, with its shares rising.

 

 

 

Optimism in the Job Market and Economy

Despite the stock decline, some strategists are more optimistic about the strength of the job market and the overall economy.
Michael Wilson from Morgan Stanley raised his outlook on cyclical stocks relative to safer defensive stocks,
citing robust economic data and expectations of more interest rate cuts from the Federal Reserve.

David Kostin from Goldman Sachs also raised his 12-month target for the S&P 500 to 6,300 points.

Meanwhile, BlackRock strategists reaffirmed their confidence in U.S. stocks, highlighting slowing inflation and lower interest rates.

 

 Start of Earnings Season

As the earnings season approaches, traders closely watch corporate performance beyond the macroeconomic picture.
Analysts expect the third-quarter earnings season to be a fruitful opportunity for investors who follow active money management strategies,
according to strategists at Bank of America.
In a memo on Monday, a team led by Ohsung Kwon stated that
“the options market expects the largest implied move in individual stocks after earnings since 2021,

while volatility in the S&P 500 remains low.”
They added that the upcoming earnings season will provide a prime environment for stock pickers.

Financial sector earnings will kick off on Friday,

with reports from JPMorgan Chase, Wells Fargo, and BlackRock.
According to Bloomberg Intelligence, net interest income and capital market revenues

will be critical areas of focus after the Federal Reserve’s rate cut in September.

In the airline sector, Delta Air Lines—the first major U.S. airline to report its results this quarter
—is expected to provide insight into travel demand following reports from Airbnb

and Booking Holdings, which indicated a decline in holiday spending.

 

 

Technology Stocks Weigh on Wall Street Indices

Wall Street Indices Rise Amid Rate Cut Expectations Following Inflation Report

Wall Street Indices Rise Amid Rate Cut Expectations Following Inflation Report:
S&P 500 Climbs for Fifth Consecutive Day, Recording the Longest Winning Streak in Over a Month

 

Content
Market Bets
Rate Cut

Green Light for Rate Cut
Anticipated Reports

 

 

 

Markets Bet on Less Than 35 Basis Points Rate Cut in September

Wall Street indices rose amid sustained bets that the Federal Reserve will begin cutting interest rates in September,
following a U.S. inflation report that aligned with expectations.
The S&P 500 index (S&P 500) climbed for the fifth consecutive day,
achieving the longest winning streak in over a month.
Most major sectors, led by financials and energy, also rose.
Meanwhile, Treasury yields remained within narrow ranges, and the dollar’s value stayed near its lowest levels in four months.

The Consumer Price Index (CPI) showed a trend toward price contraction,
relieving markets that are still reeling from last week’s downturn.
With a weakening labor market, the Federal Reserve is widely expected to start cutting interest rates next month,
However, upcoming data will likely determine the extent of the expected cut.

 

Expected Rate Cut Amount

Chris Larkin from E*Trade, a subsidiary of Morgan Stanley, said,
“The CPI may not have been as strong as the Producer Price Index (PPI) released yesterday,
but it likely won’t alter the overall picture.”
The main question is whether the Fed will cut interest rates by 25 or 50 basis points next month.
If most data over the next five weeks indicates economic slowing,
the central bank might opt for a more significant rate cut.

On the other hand, Krishna Guha from Evercore said that while the CPI for July wasn’t perfect,
it was good enough as it aligned with the quieter inflation data favored by the Federal Reserve.
He pointed out that the central bank has shifted its focus to broader outlooks and risk balance,
with negative employment risks dominating since the July jobs report.
He emphasized that “the Fed is now prioritizing labor data over inflation data,
and upcoming labor market data will determine how aggressively the Fed proceeds with rate cuts.”

The S&P 500 hovered around the 5455-point level, while the performance of major stocks was mixed,
with Nvidia and Alphabet shares declining. The “fear gauge” in Wall Street—VIX—continued its decline,
falling to 16 points after an unprecedented spike to 65 points last week.
Meanwhile, 10-year Treasury yields decreased by one basis point to 3.83%.
Swap traders expect a rate cut of less than 35 basis points in September.

 

 

 

 

Green Light for Rate Cut

Mark Hackett from Nationwide said that “calming macro concerns” are among the factors creating better conditions for stocks,
noting that the pressure from market declines has now “faded into oblivion.”

According to strategists at TD Securities, led by Oscar Munoz and Gennadi Goldberg,
the latest CPI report gives the Federal Reserve the green light to cut interest rates in September.
They stated, “Today’s CPI report is unequivocally good news for the Federal Reserve.”
With risks now evenly balanced or slightly tilted towards negative employment outcomes,
they expect the Fed’s next decision to entail the first rate cut.

Chris Zaccarelli from Independent Advisor Alliance believes the July CPI report essentially bears the message of “no new news is,
in itself, good news,” as markets were on edge. The Fed is looking to cut rates, but there is nothing in this report preventing them from doing so.

Seema Shah from Principal Asset Management said that the CPI numbers
remove any remaining inflation-related obstacles that might have prevented the Fed from starting a rate-cutting cycle in September.
However, the data also suggests limited urgency to cut by 50 basis points.

Florian Ilbo from Lombard Odier Investment Managers said the report offers little new information
to guide the Fed’s future decisions besides supporting the likelihood of a rate cut due to labor market concerns.

 

Anticipated Reports

Traders still expect a total monetary easing of just over one percentage point this year,
with three Federal Reserve policy meetings remaining this year.
In recent sessions, the market has been divided over
whether the September rate cut will be 25 or 50 basis points.

Brian Rose from UBS Global Wealth Management said,
“The inflation data was good enough to allow the Fed to begin cutting rates in September,
but it doesn’t give them a reason to cut aggressively.”
He added, “The decision on whether to cut by 50 basis points instead
of the usual 25 basis points could come down to the August jobs report.”

He also pointed out that Thursday’s upcoming retail sales figures represent another important data point,
with the primary downside risk to his base assumption of a soft landing being a decline in consumer spending.

Neil Sun, portfolio manager at BlueBay at RBC Global Asset Management,
commented, “The U.S. economy is slowing sustainably, and the labor market is showing some signs of slowing.
However, we are not overly concerned about short-term recession risks in the U.S.
We are prepared to cautiously take advantage of any dips resulting
from volatility if the underlying trends of easing inflation and sustainable economic slowdown in the U.S. continue.”

 

Wall Street Indices Rise Amid Rate Cut Expectations Following Inflation Report

Wall Street Indices Near All-Time Highs Awaiting Nvidia Results:

Wall Street Indices Near All-Time Highs Awaiting Nvidia Results: At the end of the recent trading sessions,
the S&P 500 index closed at around 5308 points, reflecting market stability.
Simultaneously, Nvidia’s shares significantly rose due to analysts’ bullish expectations for further stock price increases.
On the other hand, Treasury bonds declined at the start of a busy week with new investment-grade bond issuances,
reflecting investor movements in the financial market.

 

Contents

Nvidia Results

S&P 500 Index

Maintaining Momentum

Reasons for Index Rise
 Beneficiary Sectors

Stock Evaluations

The Next Step

Unlikely Earnings Scenario

 

 

 

Nvidia Results

The U.S. stock market indices hover near their all-time highs just days before Nvidia Corp,
one of the “Magnificent Seven” announces its results.
In a highly anticipated event for both Wall Street and the tech world, the chipmaker,
at the heart of the AI frenzy fueling the bull market, will report its earnings on Wednesday.
Investors seek numbers and guidance from CEO Jensen Huang to renew confidence in the insatiable demand for its chips.

Jay Woods from Freedom Capital Markets stated, “For the market to maintain momentum this week,
it might all come down to one stock: Nvidia.
” He added, “Well, that’s not entirely true, but the buzz around this
earnings event will be the talk of trading desks and media all week.”

 

S&P 500 Index

The S&P 500 index closed at around 5308 points.
Nvidia’s shares rose based on analysts’ bullish expectations.

Ethereum led a rise in cryptocurrency prices amid speculation that opposition is easing towards
an exchange-traded fund tracking the second-largest cryptocurrency.
JP Morgan Chase shares fell after Jamie Dimon said the bank would not repurchase many shares “at these prices.”

Another group of Federal Reserve spokespersons reiterated a wait-and-see approach regarding interest rates.
Treasury bonds fell at the start of a busy week with new investment-grade bond issuances
as companies rushed to sell bonds before the U.S. holiday weekend.
Ten-year bond yields rose by two basis points to 4.44%.

 

Maintaining Momentum

Chris Larkin from ETRADE at Morgan Stanley said the market faces a familiar question:
Can the Bulls maintain momentum?
He added, “Traders seemed pleased with last week’s economic numbers,
which were in a moderate range,” and noted that with a relatively light economic calendar this week due to a lack of significant data,
“earnings are expected to drive market discussions, with Nvidia topping a strong list of tech and retail names.”

 

 

 

 

Reasons for Index Rise

The S&P 500 index set several records in 2024, with U.S. stocks gaining $12 trillion since late October.
Part of this is due to hopes for a soft landing with the economy remaining relatively strong while inflation cools,
fueling bets that the Federal Reserve will cut interest rates this year.

The other part is enthusiasm for AI technology. The chip giant Nvidia is responsible for about a quarter of the index’s gains.
Besides Microsoft, Meta, and Alphabet (Google’s parent company), nearly 53% of the benchmark’s gains come from just five stocks.

Jason Trennert from Strategas Securities said, “Since companies like Cisco emerged in the late ’90s,
we can’t recall a single stock having such a massive impact on overall market expectations.”
He added that Nvidia’s earnings announcement last May “made even the most skeptical investors regarding AI’s future take notice.”

 

Beneficiary Sectors

For Jason Draho from UBS Global Management, Nvidia’s results could enhance AI tailwinds,
amplifying a buying wave driven by profit motives.
Shares of the world’s largest chipmaker by market value have risen about 5%
in the second quarter after climbing 82% in the year’s first three months.

As of Friday’s close, options markets were pricing in an 8.6% swing in Nvidia’s shares in the session after it announced its earnings.
David Donabedian from CIBC Private Wealth in the U.S. said,
“The company’s report will be scrutinized, and the bar may become too high to clear at some point.”

Bank of America strategists, led by Ohsung Kwon, considered that Nvidia, the darling of AI,
will no longer be the main stock-driving stock market gains as the benefits
of emerging technology expand to include other industries. Strategists see industries, commodities,
and utilities as some of the key beneficiaries.

 

Stock Evaluations

The recent rise in tech stocks has been supported by strong first-quarter reports and the anticipation of robust earnings,
but “valuations remain a concern,” according to strategists from RBC led by Lori Calvasina.
Saira Malik from Nuveen said, “With stock valuations already high, there may be less room for further increases,”
and suggested making additional portfolio allocations to sectors that have lagged behind the broader
market due to their cyclical nature and sensitivity to interest rates.

From her perspective, investors should pay attention to the likelihood of
a significant underweight position in U.S. small-cap stocks and listed real estate,
as these industries could rebound once the Federal Reserve finally shifts to a more accommodative monetary policy.

 

 

 

 

The Next Step

After experiencing the first decline of more than 5% this year, the S&P 500 has rebounded and is heading for its best month in 2024.
So, what’s the next step? History, though not guaranteed,
suggests that investors should stay the course by letting the winners win, according to Sam Stovall from CFRA.

He noted that during the 35 recovery periods following a decline since 1990,
which typically lasted 3.5 months before slipping into another decline of 5% or more,
The index rose by an average of 8.6%.
Furthermore, the three sectors that led the market during the recovery phase continued
to outperform the index in the post-recovery period, with an average rise of 10%,
outperforming the index 68% of the time, as Stovall said.

 

Unlikely Earnings Scenario

American earnings would need a sharp jump in the third and fourth quarters to meet analysts’ current full-year estimates.
This scenario is “unlikely” if economic data remains weak,
according to strategists from JPMorgan led by Mislav Matejka.
Michael Wilson from Morgan Stanley now expects the S&P to rise by 2% by June 2025,

a significant shift from his view that the benchmark index would fall by 15% by December.

The strategist, whose bearish predictions for 2023 failed to materialize as markets continued to rise,
finally capitulated, raising his target for the S&P to 5400 points from 4500 points. Wilson wrote,
“In the U.S., we expect strong earnings per share growth alongside modest multiple compression.”

According to strategists at HSBC led by Max Kettner, the rally in risk assets will last longer,
partly because short-term sentiment and positions have yet to send a warning signal.
Kettner added, “Our machine learning models suggest a stock market environment where everything is rising.”

 

 

Wall Street Indices Near All-Time Highs Awaiting Nvidia Results: