The S&P 500 adds to its winningsThe S&P 500 has spent the last four sessions in the green on the back of a strong start to earnings season, and is on its longest winning streak in just under two months.
Earnings season got off to a great start last week after big banks kicked things off with surprisingly strong results, sending the S&P 500 to its biggest weekly gain since August. This week’s earnings will turn the heat up, with companies like Tesla and Netflix reporting.
After lifting 1.82% last week, the S&P 500 continued its gains with a lift of 0.34% on Monday to its highest closing price since early September.
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Earnings season comes in hotS&P 500 saw its biggest one day jump since March, ending the day up 1.79% on the back of a better-than-expected start to earnings season.
The S&P 500 was given a jab in the arm on Thursday after big banks kicked off the earnings season boasting booming profits, boosted by reserves set aside for the big debt default that never happened. Tech stocks led the pack with an increase of 2.3% as investors cheered recent data showed that showed that the number of people filing for unemployment benefits has fallen to a 19-month low. Mark Haefele, chief investment officer of UBS Global Wealth Management, said in a note Thursday, said:
So far, the overwhelming majority of large US companies have been able to generate higher profitability despite rising labor costs because sales growth has been so robust. We expect the same to be true in 3Q.
Alan Lancz, president at investment management firm Alan B. Lancz & Associates Inc., gave his two cents:
Some of the things that worried the market in September, and even last week, as far as the inflation aspect and higher interest rates and the Delta variant, maybe have lessened. Not that it’s all over, but on a temporary scale at least, you can make a case for it trending in the right direction.
The index closed the day up 1.79% at a monthly high of $4,438.25.
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The S&P 500 snaps back to lifeAfter a three-day losing streak, the S&P 500 made a recovery of 0.30% on Wednesday, shrugging off recent data showing surging inflation prices and confirmation that the Federal Reserve will begin its tapering process as soon as mid-November.
Consumer prices are up 5.4% for September, marking the fifth month in a row that inflation has seen an increase of 5% or more. The increase was just ahead of analyst expectations, so the market wasn’t blindsided, but prices still lost 0.39% in the first hour of trading. Traders were also digesting the minutes of the Federal Reserve’s last meeting released on Wednesday, which confirm suspicions that a gradual bond tapering process will start around mid-November. The process will see the agency reduce its $120 billion a month bond buys, likely starting with reduction to its $5 billion a month in mortgage-backed securities and the $100 billion a month it spends in Treasury’s.
The index ended the day at $4,363.79.
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S&P 500 slips on earnings nervesIt feels like the fate of the market depends on this upcoming earnings season as investors and analysts wait patiently for the numbers to roll in. After spending nearly every month in the green this year, the S&P 500 has been on a losing streak since the start of September, losing over 4% since September 2 to close at $4,350.64 on Tuesday. Analysts are mixed regarding what the rest of the year holds, but Morgan Stanley says the chances of a strong correction will depend on what Q3 earnings have to say. Morgan Stanley strategists, led by Michael Wilson, wrote:
The S&P 500's more erratic behavior since the beginning of September has coincided with the Fed's more aggressive pivot toward tapering of asset purchases. While the average stock has already experienced a 10-20% correction this year, the S&P 500 has avoided it, at least so far. As of today, that de-rating is about halfway done based on prior mid-cycle transitions. Whether this correction is 10%, 20%, or already over will be determined by what happens to earnings revisions over the next few months.
Historically, the third quarter is often the strongest of the year, so hopes are high.
S&P 500 slips to start the weekThe S&P 500 ended Monday down 0.69%, weighed down by economic concerns, the upcoming third-quarter earnings season, and surging oil prices. Plexo Capital Managing Partner Lo Toney said:
What we’re seeing right now is the market trying to grapple and come to terms with how to interpret all these inputs. It’s going to take a little bit of time for things to settle out.
Eight of the eleven sectors listed on the S&P 500 ended the day down on Monday, led by big losses in utilities stocks. Bernstein’s Neil Beveridge wrote:
High or rapid increase in energy costs have triggered recessions in the past and there is a possibility that history could repeat itself if energy prices continue to rise. Higher energy prices result in lower disposable income for consumers.
Analysts are closely watching this quarter's earnings season, which starts this week, and are expecting an earnings growth rate of around 26.7% for Q3 – which would be its third highest increase since 2010. Some are concerned that a slower return for the services industry and upcoming tapering might impact economic growth, and Goldman economist Joseph Briggs said in a note:
For activities like going to a movie theater, many individuals don’t anticipate resuming normal spending patterns for at least another 6 months, suggesting a full normalization in economic activity may take some time.
The index is up 1.25% so far for October after seeing a dip of 4.76% in September. Prices closed Monday down 0.70% at $4,391.20.
Jobs report pushes along tapering plansThe latest U.S. jobs report showed that jobs increased by 194,000 in September, way below estimates of 500,000, but coming in strong enough that the Fed will likely go ahead with tapering its $120 billion a month bond purchases, which has been stimulating the economy. The mild report means that the central bank will likely start tapering in November, and Fitch Ratings Chief Economist Brian Coulton said:
Overall, this looks like a ‘decent’ enough labor report to allow the Fed to proceed with the taper in November, as flagged at the last FOMC meeting.
Fed Chairman Jerome Powell indicated that a jobs gain of ar9und 200,000 would be enough to push the bank to start tapering, and said after the agency’s September quarterly meeting:
It wouldn’t take a knockout, great, superstrong employment report.
The S&P 500 ended Friday down at $4,391.35 and closed the week up 0.79%.
SPX hits monthly high as lawmakers reach an agreementThe U.S. has spent the week creeping closer and closer towards a debt default, but yesterday Senate GOP leader Mitch McConnell offered Democrats the chance to pass an emergency expansion to the debt limit and cover spending until December – which will help the country avoid defaulting on its latest debt payment. No agreement had been reached yet, so there was a sigh of relief today when Senate Majority Leader Chuck Schumer accepted McConnell’s offer to raise the debt ceiling by $480 billion until December. White House spokeswoman Karine Jean-Pierre said:
The President looks forward to signing legislation to raise the debt limit when it is passed by Congress. This is a positive step forward. It gives us some breathing room from the catastrophic default we were approaching because of Sen. McConnell’s decision to play politics with our economy.
The S&P 500 ended the day up for the third session in a row at $4,399.75, its highest closing price since September 27.
Are investors losing confidence in big tech?The S&P 500 drops 1.30% to its lowest price since July in the face of a retreat in tech stocks.
A surge in bond yields toward the end of September has caused the tech industry to start the week in retreat. Jim Paulsen, Leuthold Group chief investment strategist, said:
The financial markets are adjusting leadership to reflect another Covid-induced reopening cycle. That is, commodities are rising, bond yields are rising, cyclical sectors and small cap stocks are outpacing, and technology and growth stocks in general are underperforming.
Tech stocks across the board slipped to lows not seen in months, with most stocks ending Monday in the red – Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN) all fell between 2% and 3%, Alibaba (BABA) dropped 3.17%, and Nvidia (NVDA) and Virgin Galactic (SPCE) both lost nearly 5%. The fourth quarter is historically a good one for stocks, but the market is feeling pressure from the Fed’s upcoming tapering process and rising interest rates.
The index ended the day down 1.30% at $4,300.47, its lowest closing price since July 20.
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The market has a tumultuous TuesdayThe market in general had a bad day on Tuesday, with tech stocks taking the brunt of the pressure, and the S&P 500 ended the day down 2.04% for its worst day in months. There has been a lot of commotion within the market recently, largely sparked by challenges coming out of China like the Evergrande crisis and a ban on all cryptos, and things have been made worse by the weight of potential tapering from the Fed. As the U.S. economy recovers, investors are starting to worry about what a potential slowdown in bond purchasing could look like. Fiona Cincotta, senior financial markets analyst at Forex.com, weighed in:
The deep sell-off highlights the extent of the nerves in the markets surrounding the moves of the Fed. There’s also a combination of rising energy prices, concerns that inflation could be more entrenched in these elevated levels and the fact that consumer confidence is slowing.
There’s no news yet as to when exactly tapering will start, but it's expected “soon”. The index ended the day down at $4352.33.
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S&P 500 bounces backDespite a whole heap of pressure on Wall Street last week on the back of the Evergrande crisis, the S&P 500 ended the week in the green with daily gains of over 1% for the first time since July.
To round off a volatile week of trading, the S&P 500 lifted for three sessions in a row, and saw gains of over 1% on Thursday for the first time since July. The index took a hit of 1.7% on Monday as Chinese real estate giant Evergrande (3333) came close to causing some real economic instability in the region, causing ripple effects across world markets – but on Wednesday, the S&P 500 turned things around, and set off upwards for the rest of the week. China put pressure on the market again on Friday by banning crypto in all its forms, weighing down tech stocks everywhere, and Nike (NKE) brought down the team with losses of 11% on the back of a negative outlook, but the S&P trooped on in style to end the week up 0.51%.
That’s probably partly thanks to a lack of dramatic news out of the Federal Reserve following its two-day quarterly meeting last week, which concluded on Wednesday by keeping interest rates anchored near zero. There is also no new information on the agency’s tapering timeline – though it’s expected to begin “soon” while interest rates could rise as soon as 2022. Ryan Detrick, chief market strategist for LPL Financial, said:
As bad as things started off on Monday for stocks, a mid-week bounce and calm on Friday isn’t so bad. Still, many of the worries over Evergrande, a slowing economy, and continued supply chain issues are still out there.
Prices ended the week at $4,455.47.
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The Fed keeps things steady (for now)The market has been waiting anxiously for the results of The Federal Reserve’s quarter-end meeting this week, hoping for more information on its tapering schedule, interest rates, and economic forecast. For now, things are staying largely as they are, with the central bank holding rates steady for the time being. However, it says that tapering will begin “soon,” with plans to scale back asset purchases as early as November.
Though interest rates remain near zero, tapering is usually an indication that a hike is on the way, although the agency has significantly cut its economic outlook for 2021. Federal Reserve Chairman Jerome Powell said:
While no decisions were made, participants generally viewed that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate.
The S&P 500 had its best day since July on Wednesday, ending the day up 0.95%.
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Are the bears right?The S&P 500 closes below its 50 day moving average for the first time since June, indicating that the bears might have been right and further corrections could be on the way.
The S&P 500 saw its worst day since August 18 on Friday, sinking 0.91% and closing below its short term moving average for the first time in nearly three months. The index has spent every session except one in the red for the last two weeks, and though the market is scattered this new development signals a bearish shift. JJ Kinahan, chief market strategist at TD Ameritrade, said:
These trends always end at some point but boy, you have that kind of run and it’s hard not to take what you’ve seen work and continue to put it into action until it doesn’t work. Right now, it’s been a pretty reliable source of an area where buyers come in to help support the market.
The market is waiting anxiously for this week's Fed meeting – which will give investors an idea of when what its tapering plans are.
Will the S&P 500 turn green for the week?The S&P 500 had its best day in three weeks on Wednesday, but it still looks like it’ll close another week in the red as investors wait for next week’s Federal Reserve meeting.
Tuesday’s inflation data showed that inflation has risen less than expected in the last month, which helped ease fears that the economic comeback was slowing. Prices lifted 0.86% on Wednesday, the best daily gain in almost three weeks, but prices are still down for the week as the market chews its nails over next weeks Fed meeting – which will give investors an idea of when what its tapering plans are.
Analysts are all over the map when it comes to what the rest of 2021 will look like. There are some who see a correction of anywhere between 10% and 15%, but others like JP Morgan see a 6% hike by the end of the year on the back of business cycle momentum and the holiday season. JP Morgan analysts wrote:
As long as Covid continues to ease, strong momentum should continue into 2022 as businesses start to rebuild depleted inventories and ramp-up capex from historically depressed levels. At the same time, cross-border activity has the potential to more meaningfully rebound for the first time since the onset of the pandemic.
The S&P 500 ended Thursday down 0.15%.
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S&P 500 logs weekly lossesLast week wasn’t great for the S&P 500, which lost ground over five straight sessions for the first time since February. The index hasn’t lifted more than 1% in over a month.
For the first time since February the S&P 500 has faced losses for five sessions in a row, as investors begin to worry about the Fed's stimulus tapering timetable and potential tax hikes. Things were made worse by the recent equity market correction – as of Friday, listed stocks were down on average 10% from their 52-week high.
The S&P has been struggling to see any notable gains, failing to lift over 1% in a single day in over the past month. Seema Shah, chief strategist at Principal Global Investors, is still cautiously optimistic though:
The fundamentals are still extremely supportive, financial conditions are very easy. We’re looking at a new phase in the business cycle or at least the next stage of it. We’ve got markets inevitably in transition and this is a time where you have to be really, really careful which companies you’re investing in.
Prices ended the week down 1.69% at $4,458.57.
Banks weigh in on what the rest of the year holdsThe S&P 500 has spent the week in the red, ending Thursday down for its fourth session in a row, and Wall Street comes in mixed on how the rest of the year will look.
The S&P 500 has been dealing with an extended Labor Day hangover it seems, spending the week in the red as a couple of banks came out with predictions on what the rest of the year holds for the high-profile index – and opinions are pretty mixed.
Earlier this week, Morgan Stanley (MS) predicted a correction of between 10% and 15% by the end of the year, saying the drop is “necessary to restore risk premiums and preserve forward returns”. The S&P 500 Index has been on the up-and-up this year, lifting over 20% since January and last week notching its 55th record closing high of the year – all without seeing a single drop of more than 5%.
Bank of America (BAC) is slightly more optimistic, seeing a decline of only 6% before year-end on the back of pressure on margins from rising costs. BofA (BAC) also assigned a 2022 year-end target of 4,600 – up only 2% from current levels.
UBS (UBS) is most optimistic of all, assigning the index the highest price target on Wall Street at 4.650. The bank cited a slow-down in COVID cases, impressive Q2 earnings, and increasing growth activity, and said:
Equities are likely to sell off at some point in coming weeks as investors brace for higher yields, taxes, slowing data, etc. But peak growth does not mean a deep slowdown is imminent.
The S&P 500 ended Thursday down 0.46% despite news that jobless claims fell to a near 18-month low, which should ease fears of slowing economic recovery; but got people worried that the Fed would be scaling back its accommodating pandemic-induced policies. Chris Rupkey, chief economist at FWDBONDS, gave his two cents:
There is likely to be a fierce debate at the coming Fed meeting on how tight the labor market is, but if policymakers focus on the most timely data we've got, they will realize that the labor market is close to meeting their more stringent criteria for an interest rate hike let alone the trigger for tapering.
Could the summer streak finally be coming to an end?Morgan Stanley predicts a market correction of up to 15% for the S&P 500 before the end of the year after a too-good-to-be-true 2021.
The S&P 500 Index has been on the up-and-up this year, lifting over 20% since January and last week notching its 55th record closing high of the year – all without seeing a single drop of more than 5%. The bull run has been fuelled by a combination of retail investors getting involved in meme stock mania and the masses of fiscal and monetary support people have been given in the face of the COVID-19 pandemic.
The index had certainly had a hot girl summer, up 13% since the beginning of April, but it looks like Autumn could be colder than usual with Morgan Stanley predicting a correction of between 10% and 15% by the end of the year. Analyst Lisa Shalett said:
While we see the economic cycle and the bull market remaining intact, we think a correction is necessary to restore risk premiums and preserve forward returns for selective and active stockpickers. The broad index needs to pause, consolidate its historic run and position for lower liquidity, higher real interest rates and higher inflation.
Three additions for the third of the monthThe S&P 500 adds Match.com, Ceridian HCM and Brown & Brown to its coveted index, dropping Perrigo Company, NOV, and Unum.
The index’s latest adjustment sees three new companies set to join the list as of September 20.
Communication services company Match.com (MTCH), which owns popular dating apps like Hinge and Tinder, soared over 7% on the news. The company has a market cap of over $40 billion, and will replace pharma group Perrigo Company (PRGO), which is being bumped down to the S&P MidCap 400 because its market cap no longer meets requirements.
Information tech firm Ceridian HCM (CDAY) and insurance company Brown & Brown (BRO) will be promoted from the S&P MidCap 400, trading places with insurance group Unum (UNM) and oil and gas company NOV (NOV), which no longer have representative market caps. Brown & Brown (BRO) and Ceridian HCM (CDAY) lifted around 1% each on the news.
Bio-Techne joins the indexLife sciences company Bio-Techne Corporation is set to replace Maxim Integrated Products on the S&P 500.
Maxim Integrated Products is being acquired by S&P 500 listed Analog Devices (ADI), so healthcare company Bio-Techne (TECH) – which has outgrown the S&P MidCap 400 – is getting bumped up as of August 30. Bio-Techne (TECH) gained 2.62% on the news, while Maxim Integrated lost the same amount.
Moderna jumps after S&P 500 inclusionPharma company Moderna gets a shot in the arm, lifting 10% on its addition to the S&P 500.
The coveted S&P 500 has made some adjustments, deleting Alexion Pharmaceuticals due to its planned merger with AstraZeneca. Taking its place is pharma giant Moderna, which has seen gains of over 800% since March last year on the back of its COVID vaccine success. The stock has faced some volatility recently as the Delta variant makes the rounds, but ultimately has taken on “a life of its own” according to Michael Yee, Managing Director and Senior Research Analyst at Jefferies:
It's priced in a huge amount of assumptions over the next 10 years that haven't played out yet. People believe it’s the Tesla of biotech. Think about how fast they came up with nothing a year ago, and all of a sudden, they're doing $21 billion and have injected hundreds and hundreds and hundreds of millions of people with their drug safely. That's a pretty big accomplishment.
Moderna lifted over 10% on the news.
Buybacks are backSome good news from the S&P 500: buybacks have doubled from their Q2 pandemic lows.
Share repurchasing from S&P 500 companies totaled $178.1 billion in the first quarter of 202, up over 100% from Q2, suggesting that companies have got cash flow available and are recovering from pandemic-induced losses.
To track the companies that do the biggest buybacks, take a look at the S&P 500 Buyback Index.
Spin-off success for OrganonAfter a spin-off from Merck & Co, Organon & Co will join the S&P 500, replacing Holly Frontier.
Pharmaceutical company Organon & Co (ORG) completes a spin-off from fellow S&P 500 constituent Merck & Co (MRK) and joins the coveted index as of June 3. Organon (ORG) will bump off energy company Holly Frontier (HFC), which now has a market cap more representative of a S&P MidCap 400. Merck (MRK) will continue to be part of the S&P 500.
Organon (ORG) focuses on women’s health, and though the stock lost over 3% on the news, it lifted just under 5% on its first day of trading on the index.
Charles River Laboratories joins the partyAn acquisition makes space for Charles River Laboratories International to join the S&P 500.
Drug manufacturer Charles River Laboratories International (CRL) has been promoted from the MidCap 400, replacing FLIR Systems after it was acquired by industrial conglomerate and fellow S&P 500 company Teledyne Technologies (TDY).
Charles River Laboratories (CRL) sank nearly 4% on the news, but shares lifted around 3% on its first day on the index on May 14.
PTC joins the indexDigital transformation company PTC Inc is set to move up from the MidCap 400 into the S&P 500, replacing Varian Medical Systems.
The S&P 500 makes some adjustments following the acquisition of Varian Medical Systems by German pharma company Siemens Healthineers (SHL), adding IT company PTC (PTC) to the index. The company is a computer software and services company that has been around since the 1980s, and its stock has lifted 40% since this year (as of April 15.)
Prices didn't move much on the news, but PTC stock rose 3% on its first day on the index.
S&P 500 adds four new componentsThe S&P 500 shakes things up with four new names on the list: NXP Semiconductors, Penn National Gaming, Generac Holdings, and Caesars Entertainment.
Four new companies have been given a promotion from the MidCap 400, and four more have been removed from the S&P 500 (as of market open on March 22) in a move to make sure that each index accurately represents its range.
NXP Semiconductors (NXPI) will replace Flowserve (FLS), with its stock being one of the few benefactors of the global chip shortage. As the semiconductor crisis rages on, so NXP (NXPI) has seen its business boom, and as of March 12 prices are up 14% since the start of the year and 112% from this time last year. The stock lifted nearly 9% on the news.
Penn Gaming (PENN), Generac Holdings (GNRC) and Caesars Entertainment (CZR) have been promoted from the MidCap 400 to replace Xerox Holdings (XRX), Vontier Corp (VNT), and SL Realty Corp (SLG). Penn (PENN) lifted 4.6% on the news, Generac Holdings (GNRC) gained over 2%, and Caesars Entertainment (CZR) gained less than 1%.
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