“The primary driver of the upward revision to our 2025 EPS estimate is greater margin expansion,” Kostin said. “The macro backdrop remains conducive to modest margin expansion, with prices charged outpacing input cost growth.” Crypto markets, though, continued to get a boost after Elon Musk, a close ally of Trump, was appointed as co-head of the Department of Government Efficiency, or “DOGE.” President Trump’s announcement that he will unveil retaliatory tariffs on several trading partners next week likely did little to ease these worries.
Powell is scheduled to testify before Congress this week, where the Federal Reserve chair will likely focus on interest rates and the current economic environment. On Wednesday, market watchers will get their first look at January inflation with the scheduled release of the Consumer Price Index (CPI), while wholesale, import, and export pricing data is also expected this week. The bank’s chief stock strategist recently increased his year-end S&P 500 price target to 6,000 on the prospect of further growth in corporate earnings. If job growth remains high, that could reduce the need for more rate cuts.
Only a handful of stocks bucked the S&P 500’s decline this month
Ashley told BI that because mega-cap tech stocks are “running on fumes,” investors should consider owning less expensive areas of the market, like small-cap stocks or an equally weighted S&P 500 fund. Cisco’s report scheduled for Wednesday comes as the tech equipment maker raised its full-year forecast despite reporting declining revenue. The following day, semiconductor equipment maker Applied Materials is expected to release quarterly earnings amid slowing sales in China. The bearish strategists on Wall Street are sticking to their views even after being wrong all year. Their top worry is the potential for fewer interest rate cuts than expected and growing AI hype that might fail to deliver. “Third-quarter earnings season has started on a positive note with bank management teams highlighting that consumer spending remains healthy and consistent with normal economic growth,” Lefkowitz said.
A weak December for stocks has coincided with the back end of the Treasury curve climbing. The move in rates, due in part to changing expectations around Federal Reserve rate cuts, could be hurting optimism for stocks. Small-cap stocks missed out on some of the broader market’s gains https://www.forex-world.net/ once again in 2024 as investors continued chasing technology and other large growth stocks. Despite the strong year-to-date performance, Wall Street struggled in December’s final days, with investors taking profits in some of 2024’s biggest winners and fears mounting over rising rates into year-end. The three major averages ended the week in the green, as sentiment improved after investors got more certainty around President Donald Trump’s tariff plans, while new inflation data wound up being more constructive than first thought. Traders also shrugged off data released Friday that reflected a 0.9% slump in retail sales for January, worse than the Dow Jones estimate for a 0.2% decline.
Business Briefing
DoorDash’s scheduled report comes after the delivery service recently announced a partnership with Home Depot. Coca-Cola’s expected report on Tuesday comes as the drinks maker’s unit case volumes decreased in the prior quarter as Chief Executive Officer (CEO) James Quincey warned about “near-term challenges” for the company. Goldman also sees stocks struggling relative to other assets over the next decade.
Trump shrugs off hot data as ‘Biden inflation’, calls for lower rates
- “The primary driver of the upward revision to our 2025 EPS estimate is greater margin expansion,” Kostin said.
- As a result, when Americans are employed and have confidence in the economy, they spend more and the economy grows.
- The following day, semiconductor equipment maker Applied Materials is expected to release quarterly earnings amid slowing sales in China.
- Sentiment appeared to calm after January’s producer price index report, released Thursday, as well as the consumer price index report released Wednesday, suggested a softer reading for the personal consumption expenditures price index.
- “Inflation data mostly support another rate cut at the Fed’s December decision,” Bill Adams, the chief economist at Comerica Bank, said in a note.
- That is double the 2% average gain in the second quarter and way better than the fractional average gains in the first and third quarters.
Among the top analysts at Wall Street banks, there’s some disagreement about whether all of the good news is priced in already or whether the market can continue to rise beyond already lofty valuations. Personal consumption expenditures, due Thursday, will be another input for the Fed as it nears its goal of 2% inflation. The Fed’s preferred inflation gauge is expected to show that prices rose by 2.1% year over year in September after coming in at 2.2% in August. Dogecoin spiked another 15% on the news, while bitcoin rose as much as 6% before paring its gains, surpassing the $90,000 threshold for the first time ever before dipping back below to about $88,000 later in the day.
- The conglomerate added 76,487 more shares of Verisign over the past three trading days for $15.6 million, bringing its stake to 13.8%.
- But Wells Fargo analyst Eric Luebchow told investors to see this pullback as a buying opportunity.
- For the Harvard Business Review Analytic Services, Lodge covered gender discrimination in the financial services industry.
- With wars waging, countries are building up arms and that’s good news for new defense technologies, added Helfstein.
- Higher market concentrations have typically led to poorer returns for the S&P 500 over the next 10 years, barring recessionary periods.
Inflation data and Federal Reserve Chair Jerome Powell’s comments will be watched this week as investors also prepare for another slate of corporate earnings reports. While the strategist acknowledged a “mania” could take hold in the market and push stock prices even higher from here, he said it would ultimately end with a crescendo and then a fresh swing to the downside. Finally, JPMorgan warned in a note Monday that third-quarter earnings had seen a flurry of estimate downgrades as sell-side analysts lowered their expectations. But the outlook for the stock market is less clear, with major Wall Street banks still divided on whether stock prices have further room to run. The Wedbush Securities analyst and tech bull Dan Ives described this week as the “world series for big tech.” He predicted that earnings results would come in strong and send tech stocks higher into the end of the year. Except for Apple, the tech giants reporting this week are among Nvidia’s biggest customers.
Here’s what has investors on edge as stocks cruise near record highs
Meanwhile, the total return of the S&P 500 has trailed behind the SPW, an equal-weight index of large-cap shares, and the S&P 400, an index of mid-cap stocks, for years. The largest stock in the S&P 500 is has a market cap over 700 times the market cap of the index’s 75th percentile stock. That’s the highest multiplier seen in about 100 years, a sign the benchmark index is highly concentrated. Those headwinds could lead the benchmark index to return just 3% in nominal annualized returns for the next 10 years, strategists said, down from the S&P 500’s average 13% annualized return over the last decade. McDonald’s report scheduled for Monday will show whether the fast-food chain is still struggling with traffic as inflation has pushed some consumers away, prompting the Happy Meal seller to announce new value offerings for 2025. His long-term view aligns with other bears who fret that the coming decade will look much worse than the last.
What To Expect in the Markets This Week
“Advances in defense tech—spanning automation, autonomous drones and cybersecurity—are reshaping the sector. Increasing government investment in national security and technology innovation is bolstering long-term growth potential,” he added. On December 18, 2024, Fed Chair Jerome Powell said the Fed is trying to tamp down inflation with fewer interest rate cuts in 2025 than originally planned. Inflation and employment rates, tied to consumer spending, are also key indicators. The data points will be key inputs for the Federal Reserve’s interest-rate cuts.
It’s called the December Low indicator, and it occurs when the S&P 500 closes below the December low close in the first quarter. China’s property sector has been mired in a crisis since the default of Evergrande Group in 2021, and the country is dealing with an enormous amount of distressed debt, much of it tied shakepay review to its real estate market. While the 10-year US Treasury yield has softened this year and dipped back below 4.50%, a swift rise toward 5% could trigger a stock sell-off. As for what might trigger “something more significant,” a sudden spike in bond yields is a likely candidate. Two factors that point to a robust economy are healthy employment and consumer confidence.
The bank says the S&P 500 has about a 72% chance of trailing bond-market returns and a 33% probability of lagging inflation through 2034. In a note over the weekend, Kostin issued his 10-year forecast for the stock market. He said a combination of extreme market concentration and high valuations suggested the S&P 500 would deliver annualized returns of just 3% over the next 10 years. That’s compared with the S&P 500’s annualized return of about 13% over the past 10 years.
Employment Rates And Consumer Spending Trends
According to FactSet, 75% of the companies that have reported earnings have beat earnings estimates, on par with the 10-year average. “This is a trend we expect to continue and should help to support future market gains Best high yield dividend stocks even if the price and fundamental performance of Mag-X stocks continues to decelerate in the months ahead,” Belski said. He’s also encouraged by the broadening out of the stock market rally, as it’s no longer concentrated in a handful of tech giants. That’s healthy behavior for sustainable stock market gains, according to the note. Investors solidified bets on another rate cut at the Federal Reserve’s December policy meeting.
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