Month: January 2024

© Reuters. Current S&P 500 rally is ‘far more similar’ to dotcom bubble than people think – JPM

JPMorgan quant strategists have identified “a plethora of similarities” between the current rally in US stocks and the dot-com bubble, despite common dismissals of such parallels due to the distinct “irrational exuberance” of the latter period.

For the team, a key investor concern in 2024 should be the heightened and persistent concentration in the US equity markets.

They remind investors that the top ten stocks on the MSCI USA Index, which includes the “Magnificent Seven,” now make up 29.3% of the index, close to the historical peak of 33.2% seen in June 2000.

The top five stocks alone account for 21.7%, just shy of the post-1994 high of 22.4%.

“Our analysis shows that while there are notable differences, they are far more similar than one may think!” the strategists wrote in a note.

This concentration echoes the dot-com era, particularly in the overrepresentation of technology stocks. Currently, only four sectors are represented in the top ten stocks of the MSCI USA, against a historical median of six sectors.

“Current sector allocation is even less diverse than at the height of the Dotcom bubble, with only four GICS sectors represented now compared to the six back then.”

While these top stocks command a higher valuation premium compared to the rest of the index than during the dot-com bubble, overall valuations now are less extreme than in the early 2000s.

The strategists note that although current valuations are lower, the risk associated with market concentration isn’t as critical as in the dot-com era. However, extremely high valuations could indicate that concentration levels are nearing their limits, and a market correction could serve as a natural rebalancing mechanism.

The likelihood of the broader index outperforming the top ten stocks is increasing, and given the recent significant market moves and extreme equity positioning, the strategists anticipate potential market pullbacks, likely triggered by weaknesses in the top 10 stocks.

© Reuters. FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 29, 2024. REUTERS/Brendan McDermid/File Photo

By Stephen Culp

NEW YORK (Reuters) -The tech-heavy Nasdaq lost ground on Tuesday as the market awaited a spate of high profile corporate earnings and the Federal Reserve convened for its monetary policy meeting.

The S&P 500 closed nominally lower after touching a new intraday high, while the blue-chip Dow finished higher.

Shares of Alphabet (NASDAQ:GOOGL) Inc and Microsoft Corp (NASDAQ:MSFT) fell in extended trading after the companies released their quarterly earnings reports.

“There’s a lot of trepidation over the start of the earnings releases from ‘the magnificent seven,'” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “The stocks have done incredibly well and there’s a little bit of caution being expressed right now and maybe rightly so.”

Economically sensitive sectors such as Dow Transports, chips and small caps underperformed the broader market.

The Labor Department reported an unexpected rise in job openings, hinting that the market remains too solid for the Fed to consider cutting its key policy rate as soon as March.

The Fed is expected to end its policy meeting on Wednesday with a decision to let its key interest rate stand at 5.25%-5.50%. Its accompanying statement and Fed Chair Jerome Powell’s subsequent press conference will be parsed for clues on the timing and number of rate cuts this year.

“I’m going to be looking for language that matches the storyline that we hope to see in 2024, that sometime in the second quarter we’ll see the beginning of a reduction in rates,” Tuz added. “I’m going to be listening for language that confirms that that’s the most likely scenario.”

Fourth-quarter reporting season has shifted into overdrive, with announcements so far by 144 of the companies in the S&P 500. Of those, 78% have delivered consensus-beating earnings, according to LSEG.

On aggregate, analysts now expect fourth-quarter earnings growth of 5.5% over last year, up from the 4.7% seen at the beginning of the month, LSEG data showed.

United Parcel Service (NYSE:UPS) slid 8.2% after the package deliverer issued a disappointing annual revenue forecast, weighing on transports.

General Motors (NYSE:GM) jumped 7.8% after the automaker provided an upbeat 2024 earnings forecast, and promised more capital return to shareholders.

Ford Motor (NYSE:F) rose 2.0%.

The S&P 500 declined 0.06% to end at 4,924.97 points. The Nasdaq Composite Index fell 0.76% to 15,509.90 points, while the Dow Jones Industrial Average rose 0.35% to 38,467.31 points.

Six of the 11 S&P 500 sector indexes rose, led by financials, up 1.2%, followed by a 1.01% gain in energy.

Boeing (NYSE:BA) Co shares slid 2.3% ahead of its quarterly earnings report expected before Wednesday’s opening bell. Scrutiny into the planemaker is intensifying over its 737 MAX 7 after a mid-air cabin blowout on Jan. 5.

Citigroup and Bank of America rose over 3% following rating upgrades from Morgan Stanley, pushing the S&P 500 banks index up 2.1%.

Johnson Controls (NYSE:JCI) dropped 3.8% after the building products supplier lowered its full-year profit estimate, while MSCI advanced 9.3% after the global index provider posted a higher fourth-quarter profit.

Super Micro Computer (NASDAQ:SMCI) rose 3.5% after the server seller projected stronger-than-expected quarterly sales.

Advancing issues outnumbered falling ones within the S&P 500 by a 1.2-to-one ratio.

Across the U.S. stock market, declining stocks outnumbered rising ones by a 1.4-to-one ratio.

The S&P 500 posted 80 new highs and no new lows. The Nasdaq recorded 126 new highs and 75 new lows.

Volume on U.S. exchanges was relatively light, with 10.3 billion shares traded, compared to an average of 11.5 billion shares over the previous 20 sessions.

© Reuters

Investing.com – Alphabet reported fourth-quarter results that beat Wall Street estimates, as its cloud business continued to strengthen, but advertising growth fell just shy of expectations.

Alphabet Inc Class A (NASDAQ:GOOGL) stock fell 4% in post-market Tuesday.

Google-parent Alphabet reported  earnings per share of $1.64 on revenue of $86.31 billion. Analysts polled by Investing.com anticipated EPS of $1.59 on revenue of $85.23B.

The better-than-expected results were driven by advertising growth and stronger margins, which grew 27% from 24% in the same period a year ago.

“[O]ngoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation,” the company said.

Google advertising climbed 11%, to $65.52B in Q4 from a year earlier, though that was just shy of estimates of $65.8B, with Google Search & other rising 13% and YouTube adds up 15.5%.

Google Cloud was up 26% to $9.19B in Q4 from a year earlier. 

Traffic acquisition costs, or TAC, a major cost for Google, rose to 8.2% to $13.99B in Q4 from the prior-year period.

© Reuters

Investing.com — The Dow closed at second-straight record high Tuesday, as quarterly earnings from big tech and digested economic data showing ongoing labor market strength just as the Federal Reserve kicked off its two-day meeting.

By 14:49 ET (19:49 GMT), the Dow Jones Industrial Average was up 133 points, or 0.4%, the S&P 500 was 0.1% lower, while the Nasdaq Composite dropped 0.8%.

Labor market continues to show strength as Fed meeting starts

The The U.S. Labor Department’s latest Job Openings and Labor Turnover Survey, a measure of labor demand, showed job openings in December climbed to 9.03 million, above economists estimates of for 8.75M.

The ongoing signs of labor market strength arrived on the heels of data showing consumer confidence jumped to a 2-year high.

The duo of reports, signalling economic strength, pushed 2-year Treasury yields higher, as investors bet that the data will likely encourage the Fed to maintain its higher for longer rate regime as the central bank kicked off its two-day meeting.

While the Fed is expected to keep rates unchanged, “commentary accompanying the rate decision is likely to underscore the need for ongoing patience with a balanced assessment of risk,” Stifel said in anote.

Microsoft, Alphabet kick off big tech earnings

Tech giants Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and AMD (NASDAQ:AMD) kick off the earnings season for big tech, with better-than-expected quarterly earnings.

The trio’s earnings come just ahead of earnings from Amazon, Apple and Meta due later this week.

Collectively, the market capitalization of Alphabet, Microsoft, Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Meta (NASDAQ:META) accounted for the bulk of S&P 500’s 24% gain in 2023.

In other tech news, Super Micro Computer (NASDAQ:SMCI) rose more than 3% after the dataceter hardware maker reported second-quarter results that topped Wall Street estimates amid a boost from artificial intelligence-led demand.

General Motors in rally mode on upbeat outlook, UPS slumps on guidance, Pfizer slips despite surprise profit

General Motors (NYSE:GM) stock rose nearly 7% after the auto giant provided investors with an upbeat outlook for 2024 and signaled more capital could be returned to shareholders.

“[I]t appears the profit margins and growth targets are still very much on track despite this murky backdrop,” Wedbush said in a note, following a few quarter in which the automaker’s “EV vision [was] in flux“

United Parcel Service (NYSE:UPS) stock fell 8% after the world’s biggest package delivery firm forecast annual revenue below expectations, facing sluggish domestic and international e-commerce demand. The company also detailed plans to cut 12,000 jobs to rein in costs.

Pfizer (NYSE:PFE) closed more than 1% lower after the drugmaker reported a surprise quarterly profit, though weaker-than-expected sales of key products including cancer drug Ibrance weighed on sentiment.

(Peter Nurse, Oliver Gray contributed to this article.)

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