12 Mins Ago
Market pricing is ‘very optimistic,’ says Innovator ETF strategist
The early earnings season results have showed companies beating a “pretty low bar” and the weakening economic outlook makes the market look uncomfortably pricey, according to Tim Urbanowicz, head of research and investment strategy at Innovator ETFs.
“We’re kind of entering this point where we’re starting to see what type of damage the hike cycle has already dealt, but we also don’t have the inflation cycle in the bag. … It’s very optimistic, the pricing that we’re seeing right now, especially with how low volatility is,” Urbanowicz said.
This week’s earnings slate could provide a wake-up call for markets. Urbanowicz pointed out that tech is the only one of the 11 GICS sectors to have a negative earnings surprise so far.
— Jesse Pound
21 Mins Ago
Morgan Stanley’s Wilson says current earnings dynamic poses near-term risks to stocks, market entering a second half recovery ‘reset’
Stocks may be headed for risky territory despite their performance so far this earnings season, according to Morgan Stanley’s Mike Wilson.
To be sure, the chief U.S. equity strategist noted that stocks appear to be holding up well so far this earnings period, trading more in line with fundamentals than over the past several quarters. That’s due in part to the fact that stocks have traded well heading into the period instead of selling off as in previous season.
But Wilson warns that that dynamic may be changing.
“This is different than the past few quarters and the beginning of what we think is a reset on expectations for a 2H EPS recovery,” he said in a recent note to clients. “The Fed seems determined to fight inflation even if a more significant slowdown arrives.”
Consensus expectations among analysts this quarter call for S&P 500 earnings per share growth to decline 9% year-over-year, but improve to a 4% year-over-year decline by the second quarter.
This setup, Wilson said, has held off many investors from selling in to first quarter results, given the belief that the earnings environment has reached its bottom. But Wilson casts doubt on those forecasts.
“We would agree with that conclusion if we believed the consensus forecasts,” Wilson said. “Unfortunately, our forecasts are more pessimistic, and we don’t expect the trough rate of change EPS growth quarter until 3Q or 4Q.”
— Samantha Subin
33 Mins Ago
May Fed meeting will create ‘overhang’ on market this week, Oppenheimer investment strategist says
Though the Federal Reserve policy meeting isn’t taking place until next week, Oppenheimer said the knowledge that it’s on the horizon can add volatility to the market this week.
“This week with earnings season activity ramping up across a broad array of sectors we expect investors’ anticipation of the Federal Reserve’s upcoming FOMC meeting in the first week of May to add to the day to day tone and volatility of the markets,” said John Stoltzfus, the firm’s chief investment strategist.
Many market participants expect the central bank to implement another quarter-percentage point interest rate hike at the next meeting. Investors have been closely watching the Fed amid concerns that its rate hike campaign could now tip the economy into a slowdown or recession.
“A brace of uncertainty remains as an overhang to the markets as to how long the Fed will keep raising rates and whether or not its efforts will push the economy into recession before the current Fed fund hike cycle concludes,” Stoltzfus said.
— Alex Harring
44 Mins Ago
Raymond James managing director: ‘Investors are piling into defensive stocks’
Defensive and non-cyclical stocks are becoming favorited as the market senses more pressure to earnings pressure coming amid concerns over long-term rate volatility and the debt ceiling, according to Raymond James.
“Logic would suggest piling into defensive stocks, whose earnings are less impacted by an economic slowing, and guess what, investors are piling into defensive stocks,” said Tavis McCourt, managing director of institutional equity strategy, in a note to clients Sunday.
McCourt added that defensive stocks that are considered expensive now will only get more expensive amid further weakening in what he called the “cyclical economy.”
— Alex Harring
54 Mins Ago
Recent pullback in Block shares presents potential for a positive catalyst, says Bank of America
Bank of America said the resilience of mobile payment company Block’s business model is currently underappreciated by investors.
Analyst Jason Kupferberg maintained his buy rating on Block. The bank believes Block shares could rally more than 40% from where shares closed on Friday.
Block shares are up just 2.3% in 2023 after Hindenburg Research released a short seller report on shares on March 23.
“We are bullish on SQ’s…
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