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Business Recorder
a day ago
- Business
- Business Recorder
Wall Street Week Ahead: Inflation data to test stocks as some investors brace for rally to pause
NEW YORK: A fresh look at inflation trends will test the US stock market's rally in the coming week, with some investors saying equities are primed for a potential pullback after rocketing to records. The benchmark S&P 500 was last up more than 7% on the year and within about 1% of its all-time closing high set in late July, as stocks largely rebounded from declines following a weak employment report earlier this month. Strategists at firms including Deutsche Bank and Morgan Stanley have recently said the market could be poised for some level of pullback after a largely unabated climb over the past four months, which has pushed valuations to historically expensive levels as a seasonally treacherous period for stocks begins. The monthly US consumer price index report, due on Tuesday, could cause volatility. Data showing higher-than-expected inflation could undermine the growing expectation for impending interest rate cuts. 'I do think the market is set up for a bit of a pullback,' said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth. 'There's a lot of concern bubbling underneath.' The S&P 500 has soared well over 20% since its low for the year in April, as investor fears about a tariff-induced recession calmed after President Donald Trump's 'Liberation Day' announcement earlier that month had set off extreme asset volatility. The index is trading at 22.4 times its earnings estimates for the next year, well above its long-term average P/E ratio of 15.8 after recently reaching its highest valuation in over four years, according to LSEG Datastream. Investors are also wary of risks posed by the calendar. Over the past 35 years, August and September have ranked as the worst-performing months for the S&P 500, according to the Stock Trader's Almanac. The index has declined an average of 0.6% in August and 0.8% in September — the only months of negative average performance for the index during that time period. 'The combination of a softer payroll number with concerns of tariff-related inflation could be the recipe for ... a correction, especially in the seasonally weak third quarter,' Morgan Stanley equity strategist Michael Wilson said in a note this week. Still, Wilson said his 12-month outlook was bullish, adding 'we're buyers of pullbacks.' The CPI for July is expected to have climbed 2.8% on an annual basis, according to a Reuters poll of economists. Investors will be watching to see if Trump's tariffs on imports are translating into higher prices after the June CPI report suggested levies were impacting the prices of some goods. Market bets on Fed rate cuts rose following the recent weak jobs data as investors expect the central bank will ease monetary policy to help shore up the labor market. Fed funds futures indicate an over 90% chance the Fed will cut at its next meeting in September, with at least two cuts priced in for this year, LSEG data showed.
The Star
a day ago
- Business
- The Star
US inflation data to test stocks this week
NEW YORK: A fresh look at inflation trends will test the US stock market's rally this week, with some investors saying equities are primed for a potential pullback after rocketing to records. The benchmark S&P 500 ended last Friday up more than 8% on the year and on the cusp of all-time high levels, while the tech-heavy Nasdaq Composite was at a record, as stocks rebounded from declines following a weak employment report earlier this month. Strategists at firms including Deutsche Bank and Morgan Stanley have recently said the market could be poised for some level of pullback after a largely unabated climb over the past four months, which has pushed valuations to historically expensive levels as a seasonally treacherous period for stocks begins. The monthly US consumer price index report, due tomorrow, could cause volatility. Data showing higher-than-expected inflation could undermine the growing expectation for impending interest rate cuts. 'I do think the market is set up for a bit of a pullback,' said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth. 'There's a lot of concern bubbling underneath.' The S&P 500 has surged 28% since its low for the year in April, as investor fears about a tariff-induced recession calmed after President Donald Trump's 'Liberation Day' announcement earlier that month had set off extreme asset volatility. The index is trading at over 22 times its earnings estimates for the next year, well above its long-term average price-earnings ratio of 15.8 after recently reaching its highest valuation in over four years, according to LSEG Datastream. Investors are also wary of risks posed by the calendar. Over the past 35 years, August and September have ranked as the worst-performing months for the S&P 500, according to the Stock Trader's Almanac. The index has declined an average of 0.6% in August and 0.8% in September – the only months of negative average performance for the index during that time period. 'The combination of a softer payroll number with concerns of tariff-related inflation could be the recipe for a correction, especially in the seasonally weak third quarter,' Morgan Stanley equity strategist Michael Wilson said in a note last week. Still, Wilson said his 12-month outlook was bullish, adding 'we're buyers of pullbacks'. The consumer price index (CPI) for July is expected to have climbed 2.8% on an annual basis, according to a Reuters poll of economists. Investors will be watching to see if Trump's tariffs on imports are translating into higher prices after the June CPI report suggested levies were impacting the prices of some goods. Market bets on US Federal Reserve (Fed) rate cuts rose following the recent weak jobs data as investors expect the central bank will ease monetary policy to help shore up the labour market. Fed funds futures indicate an over 90% chance the Fed will cut at its next meeting in September, with at least two cuts priced in for this year, LSEG data showed. That narrative could be at risk if CPI rises more than expected, making the Fed more hesitant to cut rates, investors said. 'If the CPI suggests that the market got a little ahead of itself, that can create volatility,' said Angelo Kourkafas, senior investment strategist at Edward Jones. 'But if it's not worse than feared that can further reinforce that we are now in an inflection point for the Fed.' The prospect of higher tariffs and the economic fallout from those levies already instituted by the Trump administration has been a persistent theme clouding markets, but stocks have managed to rise to records despite the uncertainty. Higher tariffs on imports from dozens of countries took effect last Thursday, raising the average US import duty to its highest in a century, while the president also announced plans last week for levies on semiconductor chips and pharmaceutical imports. China could face a potential tariff increase tomorrow unless Trump approves an extension of a prior truce. The impact of higher tariffs on the economy could take a while to show up, and 'the market has kind of ignored the potential negative impact of this friction to the economy', said Matt Rowe, senior portfolio manager at Man Group. 'The market has gotten comfortable with tariffs being kind of a non-event, which I don't think is correct,' Rowe said. — Reuters
Miami Herald
04-08-2025
- Business
- Miami Herald
Major analyst who forecast stocks' rally sends 3-word message to investors
The stock market has enjoyed major returns since the spring, with the S&P 500 and Nasdaq surging over 25% and roughly 40% since April 8, when a brutal sell-off caused oversold signals to flash. The returns are impressive considering the historical average return for the benchmark index is about 10% annually. Don't miss the move: Subscribe to TheStreet's free daily newsletter Yet cracks may be forming in the rally, given lackluster economic data on inflation and jobs last week sent the S&P 500 tumbling about 3% from its early week highs through Friday. The big question on most investors' minds is whether it makes more sense to buy dips or sell rips (rallies) following the drop. Veteran analyst Tom Lee, Fundstrat's founder and head of research, correctly predicted the rally in April. Over the weekend, he offered up a blunt message for investors. The S&P 500 was arguably due for a break. Before last week's stumble, it had reached all-time highs, lifting its forward price-to-earnings ratio, a key valuation measure calculated by dividing price by earnings, to 22.4, according to FactSet. The last time we had a P/E ratio this high was near February's highs, shortly before the stock market fell by 19% on concerns President Trump's tariff strategy could cause stagflation, a period of no growth and rising inflation, or worse, a recession. Related: Major Wall Street analyst revamps S&P 500 target amid tumble We may not see another near bear market drop this time, but inflation has climbed over the past three months and the latest unemployment data is worrisome, particularly given August isn't known for being overly kind to investors. Since 1950, the average post-Election year return in August is negative 1.2%. Overall, August ranks just 11th out of 12 months for S&P 500 returns, according to the Stock Trader's Almanac. Despite that backdrop, Tom Lee is unfazed, telling Fundstrat clients in a research note over the weekend to "buy the dip." More Wall Street Analysts: Veteran analyst drops surprise call on Tesla ahead of earningsBest Buy analyst, focused on earnings growth, reworks stock price targetVeteran trader posts a major warning for the stock market The long-time Wall Street watcher has been tracking stocks since the 1990s. Lee is best known for his bullish tilt, including accurately predicting stocks bottom in 2023 and the April low. He thinks any August selloff following inflation and jobs data will be short-lived, and that data suggests a friendlier Fed. So far, the Fed has left interest rates unchanged this year, despite cutting them by 1% into the end of 2024. "The economy is solid and soft enough that the Fed needs to make insurance cuts." said Lee, before adding later in the note that Friday was "an "obvious buy the dip moment." Inline with Lee's forecast, the S&P 500 rallied 1.5% on August 4 to 6329.94. That brought it just shy of the July 31 close of 6339.39 before the jobs report. Whether sellers emerge again this week may hinge on how comfortable investors are that the economy will bend, not break, and the Fed will play ball. The inflation data is concerning, given that the Personal Consumption Expenditures index shows it accelerated to 2.6% in June, up from 2.2% in April. The jobs data isn't overly encouraging either, given the latest Bureau of Labor Statistics report showed the US economy added only 73,000 jobs in July, below the 100,000 expected, and previous months were revised sharply lower. Related: Jobs report shocker resets Fed interest rate cut bets "Even more worrisome is that the numbers for the previous two months noted larger-than-normal revisions. The May number decreased to 19,000 from 144,000 and the June number fell to 14,000 from 147,000," noted Fundstrat strategist Hardika Singh. With inflation and unemployment rising, increasing the possibility of stagflation, it's understandable that investors might get a bit antsy. Stocks may have dropped more last week if not for growing optimism that rising unemployment means Fed Chair Jerome Powell will cut rates at the next FOMC meeting on September 17. The latest odds from CME's closely watched FedWatch tool place probabilities of a quarter-percent cut to a range of 4% to 4.25% at about 94%, up from 64% one month ago. An interest rate cut would be good news for stocks, given lower lending rates encourages household and business spending, supporting revenue and profit growth at publicly held companies. That potential may trump any short-term economic concerns. "For now, I see further downside as being short-lived and largely contained," concluded Fundstrat's technical analyst, Mark Newton. Related: Apple CEO drops bombshell about its future The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
04-08-2025
- Business
- Yahoo
Major Wall Street analyst revamps S&P 500 target amid tumble
Major Wall Street analyst revamps S&P 500 target amid tumble originally appeared on TheStreet. The stock market has notched big gains since spring, with the S&P 500 and Nasdaq rallying over 25% and about 40% from April 8 through last week's highs. The major indexes' gains have come in mostly a straight line; however, disappointing economic data, renewed tariff concerns, and ongoing Fed interest rate uncertainty did dent the rally late in the week. The S&P 500 and Nasdaq tumbled 2.9% and 3.8% from their highs to close at about 6,238 and 20,650 on Aug. 1 after the Fed kept interest rates unchanged on July 30, and inflation and jobs data on July 31 and Aug. 1 disappointed. The dips may not be too surprising, given that August is historically a seasonally weak month for stock market returns. Nevertheless, investors are likely wondering what could happen to stocks next following last week's swoon. Wall Street analyst resets S&P 500 target The S&P 500 was arguably in rarified air, given that it had reached all-time highs and its forward price to earnings ratio, a key valuation measure calculated by dividing price by earnings, was 22.4, according to FactSet — a level last seen when the S&P 500 peaked in February before a 19% tariff-fueled drubbing. Few expect a repeat of that nearly bear market reckoning. Still, August has a dubious track record for lackluster returns, ranking 11th out of 12 months since 1950, with an average loss of 1.2% in post-presidential election years, according to the Stock Trader's Almanac. The poor seasonality and emerging headwinds, including lackluster jobs data, concerning inflation, and newly installed tariffs, aren't lost on BTIG Chief Market Technician Jonathan Krinsky. In a research note delivered to clients this weekend, Krinsky pointed to a potential return of volatility through early October, when seasonal headwinds shift to tailwinds. A key reason behind Krinsky's short-term concern is that the S&P 500 breached its 20-day moving average on Friday. Many technical analysts use either the 20-day, or 21-day, moving average as a key short-term indicator. When the market is trading above it, gains often beget gains. When it's below it, it can mean trouble ahead. More Wall Street Analysts: Veteran analyst drops surprise call on Tesla ahead of earnings Best Buy analyst, focused on earnings growth, reworks stock price target Veteran trader posts a major warning for the stock market Krinsky thinks the S&P 500 could retreat to 6,100, which may happen more quickly than many expect. He pointed to last year, when the S&P 500 sold off by about 8% from high to low in the first few days of August. 'History doesn't repeat, but it often rhymes," said Krinsky. "A quick move back to 6,100 would be -5% from the highs and would likely be buyable initially.' Krinsky isn't alone in pointing out that the time of year isn't great for equities. "Post-election years tend to peak right about now and bottom in late October," wrote Carson Investment Research analyst Ryan Detrick on X. "No, this doesn't mean it has to happen this time, but some seasonal turbulence would be perfectly normal." In addition to the seasonal weakness, Krinsky noted that utilities, considered a defensive stock market sector, have been rallying, recently notching 52-week highs. He also sees a potential opportunity for software stocks, which have underperformed semiconductor stocks, to close the gap, given they tend to have done better than semis in August, outpacing them in nine of the past 13 years. What's setting up the potential buy-the-dip drop Stocks initially headed higher early last week on the heels of better-than-expected earnings results from technology bellwethers Microsoft and Meta Platforms. However, optimism faded on Wednesday, when the Federal Reserve chose to keep interest rates unchanged at 4.25% to 4.50%, disappointing many, including President Donald Trump, who has been arguing for big cuts all to investors' concerns, the Personal Consumption Expenditures index showed that inflation accelerated to 2.6% in June from 2.4% in May and 2.2% in April. Many expect tariffs instituted in the spring are only now causing inflation to rise. It may worsen in the coming months following newly announced tariffs after the reciprocal tariff pause ended on August 1. President Trump announced a slate of tariffs ranging from 10% to 41%, including a 35% tariff on Canada, one of our top three trading partners. Jobs data last week also suggests the economy is wobbling. The latest report from the Bureau of Labor Statistics showed just 73,000 jobs created in July, below the 100,000 expected. Worse, the BLS had previously said the U.S. economy created 147,000 jobs in June. It revised that figure down to 14,000. May's job numbers were similarly lowered to 19,000 from 144,000. The significant revisions drew the ire of President Trump, who fired BLS Commissioner Erika McEntarfer after the report, saying the numbers were "RIGGED in order to make the Republicans, and ME, look bad."Major Wall Street analyst revamps S&P 500 target amid tumble first appeared on TheStreet on Aug 4, 2025 This story was originally reported by TheStreet on Aug 4, 2025, where it first appeared. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Miami Herald
04-08-2025
- Business
- Miami Herald
Major Wall Street analyst revamps S&P 500 target amid tumble
The stock market has notched big gains since spring, with the S&P 500 and Nasdaq rallying over 25% and about 40% from April 8 through last week's highs. The major indexes' gains have come in mostly a straight line; however, disappointing economic data, renewed tariff concerns, and ongoing Fed interest rate uncertainty did dent the rally late in the week. The S&P 500 and Nasdaq tumbled 2.9% and 3.8% from their highs to close at about 6238 and 20650 on Friday after the Fed kept interest rates unchanged on Wednesday, and inflation and jobs data on Thursday and Friday disappointed. The dips may not be too surprising giving August is historically a seasonally weak month for stock market returns. Nevertheless, investors are likely wondering what could happen to stocks next following last week's swoon. Image source: Michael M. Santiago/Getty Images The S&P 500 was arguably in rarified air, given that it had reached all-time highs and its forward price to earnings ratio, a key valuation measure calculated by dividing price by earnings, was 22.4, according to FactSet-a level last seen when the S&P 500 peaked in February before a 19% tariff-fueled drubbing. Few expect a repeat of that nearly bear market reckoning. Still, August has a dubious track record for lackluster returns, ranking 11th out of 12 months since 1950, with an average loss of 1.2% in post-Presidential election years, according to the Stock Trader's Almanac. The poor seasonality and emerging headwinds, including lackluster jobs data, concerning inflation, and newly installed tariffs, aren't lost on BTIG Chief Market Technician Jonathan Krinsky. In a research note delivered to clients this weekend, Krinsky pointed to a potential return of volatility through early October, when seasonal headwinds shift to tailwinds. A key reason behind Krinsky's short-term concern is that the S&P 500 breached its 20-day moving average on Friday. Many technical analysts use either the 20-day, or 21-day, moving average as a key short-term indicator. When the market is trading above it, gains often beget gains. When it's below it, it can mean trouble ahead. More Wall Street Analysts: Veteran analyst drops surprise call on Tesla ahead of earningsBest Buy analyst, focused on earnings growth, reworks stock price targetVeteran trader posts a major warning for the stock market Krinsky thinks the S&P 500 could retreat to 6,100, which may happen more quickly than many expect. He pointed to last year, when the S&P 500 sold off by about 8% from high to low in the first few days of August. "History doesn't repeat, but it often rhymes," said Krinsky. "A quick move back to 6,100 would be -5% from the highs and would likely be buyable initially." Krinsky isn't alone in pointing out that the time of year isn't great for equities. "Post-election years tend to peak right about now and bottom in late October," wrote Carson Investment Research analyst Ryan Detrick on X. "No, this doesn't mean it has to happen this time, but some seasonal turbulence would be perfectly normal." In addition to the seasonal weakness, Krinsky noted that utilities, considered a defensive stock market sector, have been rallying, recently notching 52-week highs. He also sees a potential opportunity for software stocks, which have underperformed semiconductor stocks, to close the gap, given they tend to have done better than semis in August, outpacing them in 9 of the past 13 years. Stocks initially headed higher early last week on the heels of better-than-expected earnings results from technology bellwethers Microsoft and Meta Platforms. However, optimism faded on Wednesday, when the Federal Reserve chose to keep interest rates unchanged at 4.25% to 4.50%, disappointing many, including President Trump, who has been arguing for big cuts all year. Related: Jobs report shocker resets Fed interest rate cut bets Adding to investors' concerns, the Personal Consumption Expenditures index showed that inflation accelerated to 2.6% in June from 2.4% in May and 2.2% in April. Many expect tariffs instituted in the spring are only now causing inflation to rise. It may worsen in the coming months following newly announced tariffs after the reciprocal tariff pause ended on August 1. President Trump announced a slate of tariffs ranging from 10% to 41%, including a 35% tariff on Canada, one of our top three trading partners. Jobs data last week also suggests the economy is wobbling. The latest report from the Bureau of Labor Statistics showed just 73,000 jobs created in July, below the 100,000 expected. Worse, the BLS had previously said the US economy created 147,000 jobs in June. It revised that figure down to 14,000. May's job numbers were similarly lowered to 19,000 from 144,000. The significant revisions drew the ire of President Trump, who fired BLS Commissioner Erika McEntarfer after the report, saying the numbers were "RIGGED in order to make the Republicans, and ME, look bad." Related: Apple CEO drops bombshell about its future The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
