Why This Investor Believes a Bottom May Be Forming in the Stock Market
While Bank of America is advising investors to short the S&P 500 (SPY), Fundstrat's head of technical strategy, Mark Newton, sees signs that are pointing to a potential bottom in the stock market. In an interview with CNBC, he noted that extreme selling pressure and weak market breadth—two common signs of capitulation—suggest that the worst of the decline could be over or that the market is at least in the process of stabilizing.
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Newton highlighted that the rebound in tech and financial stocks, especially the 'Magnificent Seven,' is a positive sign. These leading stocks, which had taken a beating, are now showing strength and recovering from recent lows. However, he warned that investors shouldn't expect a rapid comeback. He predicted the market is more likely to follow an 'L-shaped' recovery, which means that it could trade sideways for 30 to 60 days before mounting a more sustainable rally.
'We're likely trying to put in some type of a low,' Newton said, but emphasized that 'a lot of damage has been done.' Instead of a quick return to record highs, he expects a slow and choppy recovery as investors regain confidence and try to digest recent economic and geopolitical uncertainties. While optimism is growing, patience will still be needed in the weeks ahead.
Is SPY a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 412 Buys, 84 Holds, and eight Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $616.20 per share implies 16.1% upside potential.
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Globe and Mail
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CTV News
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China blasted the United States on Monday for moves that it said hurt China's interests, including issuing AI chip export control guidelines, stopping the sale of chip design software to China and planning to revoke Chinese student visas. 'These practices seriously violate the consensus' reached during trade discussions in Geneva last month, the Commerce Ministry said in a statement. That followed President Donald Trump's accusation at the end of last week, where he said China was not living up to its end of the agreement that paused their tariffs against each other. Hopes for lower tariffs because of trade deals that Trump could reach with other countries were the main reasons for Wall Street's big rally last month, which brought the S&P 500 back within 3.8% of its all-time high. The index had dropped roughly 20% below the mark in April. But Trump on Friday told Pennsylvania steelworkers he's doubling the tariff on steel imports to 50% to protect their industry, a dramatic increase that could further push up prices for a metal used to make housing, autos and other goods. That helped stocks of U.S. steelmakers climb. Nucor jumped 9.4%, and Steel Dynamics rallied 10.1%. But automakers and other heavy users of steel and aluminum weakened. General Motors reversed by 4.2%, and Ford fell 3.9%. Lyra Therapeutics soared 356% after reporting positive late-stage trial results of an implant to treat chronic sinus inflammation in some patients. Reports on the manufacturing industry released Monday suggested the effects of Trump's tariffs are taking root in the economy. 'The impact of ever-changing trade policies of the current administration has wreaked havoc on suppliers' ability to react and remain profitable,' one manufacturer in the transportation equipment industry said in the Institute for Supply Management's survey. 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In the bond market, Treasury yields rose as worries continue about how much debt the U.S. government will pile on due to plans to cut taxes and increase the deficit. The yield on the 10-year Treasury rose to 4.46% from 4.41% late Friday and from just 4.01% roughly two months ago. That's a notable move for the bond market. Besides making it more expensive for U.S. households and businesses to borrow money, such increases in Treasury yields can deter investors from paying high prices for stocks and other investments. Stan Choe, The Associated Press AP Writers Jiang Junzhe and Matt Ott contributed
