By Barbara Kollmeyer
Critical information for the U.S. trading day
While falling bond-yield heroes helped drag the S&P 500 out of a quick and dirty correction, we’re about to find out how much earnings still matter for markets, with mega performer Nvidia releasing results later.
Many investors may have been wrong-footed by the market this year, girding for a recession that never came, and that extends to Wall Street strategists, most set to miss their S&P 500 end-year targets.
Société Générale is among the few standouts, as the S&P (as of Monday’s close) sits 4% away from the bank’s 4,750 bull’s-eye, which they are also sticking to in 2024.
In our call of the day, the Swiss bank’s strategists predict a “decisive” year ahead, and say get ready to buy the dip as the S&P 500 will find its “true bottom for this cycle.” Some 150 basis points of Fed rate cuts, slowing GDP and clarity on the political cycle by end 2024 are on the cards, say Manish Kabra and Charles de Boissezon.
So here’s how they map out 2024, quarter by quarter:
Q1) S&P 500 gains as bond yields drop, the global cycle is in upturn and the index still has easier year-over-year comparative earnings. Q2) “The toughest quarter, with a visible consumer-driven downturn and rising political uncertainty.” Q3) A weak seasonal quarter, plus rising political uncertainty, though more pronounced Fed cuts. Tougher Nasdaq-100 earnings comparisons mean broader gains will be needed to drive up the S&P 500 and that won’t come until… Q4) With U.S. elections done and dusted, reshoring stocks benefit, and market breadth starts to improve as focus turns to strong growth.
So what’s the investor playbook for this layout? They offer four big calls on U.S. stocks next year:
Buy the dip on the S&P 500. Buying opportunities will spring up as leading indicators for profits continue to improve, and the year won’t be smooth, with a mild recession in mid 2024, a Q2 credit-market selloff and ongoing quantitative tightening. Long (or bullish) equal-weighted version of the Nasdaq-100 versus the Russell 2000 RUT. The equal-weight Nasdaq-100 offers a “good alternative for gaining exposure to big-cap growth earnings momentum through a more diversified index.” And while a recent small-cap bounce has drawn bullish bets, SocGen is gloomy amid a wall of refinancing as a quarter of firms are now loss-making. (The First Trust Nasdaq-100 Equal Weighted Index Fund QQEW tracks that index). Long U.S. reshoring stocks. Since the Inflation Reduction Act was signed, more than $500 billion in new investments have joined that pipeline, while reshoring stocks have outperformed broader industrials under both Trump and Biden governments. (The Transform Supply Chain SUPP and ProShares Supply Chain Logistics SUPL are two broader exchange traded plays on this. Here are a few more American Revival stocks to play that theme.)Bullish on the Rise of Robots. SocGen says the global generative AI market is set for compound annual growth of 31.4% over 2023-32. (Up about 244% this year, Nvidia has driven home AI’s impact on investors, but other ways in are Cathie Woods’ ARK Autonomous Technology & Robotics ETF ARKQ, or the iShares Robotics and Artificial Intelligence Multisector ETF IRBO
Don’t miss: These ten stocks, not just from tech, are the key to next year’s S&P 500 earnings growth
Stock futures (ES00) (NQ00) are slipping, while Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y were steady. Oil prices (CL.1) are softer, with gold (GC00) firmer and the dollar DXY pulling back.
Nvidia (NVDA) results are in the spotlight for after the close, and investors may be looking far into the future. HP (HPQ) and Autodesk (ADSK) also report late.
Ahead of the open, Lowe’s (LOW) shares are tumbling on lowered guidance, with Best Buy (BBY) results are still to come. Baidu (BIDU) swung to a profit and the China tech group’s shares are rising.
Shares of Zoom (ZM) are up after the videoconferencing platform lifted its full-year sales and profit outlook and shares are up.
Existing home sales are due at 10 a.m., followed by the minutes of the Fed’s most recent meeting.
Elon Musk’s X is suing media watchdog Media Matters for defamation.
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