Latest news with #LewisKrauskopf
Yahoo
6 days ago
- Business
- Yahoo
Tariffs, Fed, tech results headline jam-packed markets week
By Lewis Krauskopf NEW YORK (Reuters) -A looming U.S. deadline for more severe global tariffs is among a barrage of upcoming events threatening to disrupt an increasingly calm U.S. stock market that has set a string of all-time highs. President Donald Trump has extended a deadline to August 1 for when higher levies will take effect on an array of trading partners unless deals are struck. That could boost market volatility heading into next Friday. Much more is on the calendar that could move markets. Investors will watch the Federal Reserve's monetary policy meeting, the monthly U.S. employment report and earnings reports from megacap companies Apple, Microsoft and Amazon. "There is going to be a lot to digest for markets into next week," said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. "Expectations from the markets have gone up relative to several months ago," Miskin said. "So it's just going to be another big week for trying to meet loftier expectations." RECORD HIGHS, FALLING VOLATILITY The benchmark S&P 500 kept tallying new all-time highs during the week. Equities have recovered from a plunge after Trump's April 2 "Liberation Day" tariff announcement set off fears of a recession that have since ebbed. The S&P 500 has surged 28% since its low for the year a week later, while the tech-heavy Nasdaq Composite has jumped 38% in that time. "We just got three years of return in three and a half months," said Chris Galipeau, senior market strategist at the Franklin Templeton Institute. "The equity market needs to consolidate this move." Market volatility measures have eased considerably. The Cboe Volatility Index spiked to 60 in April, but has been below its long-term median of 17.6 for most of July and on Wednesday posted its lowest close in five months. However, pockets of volatility have emerged in the past week. Eye-popping gains in highly shorted stocks such as Kohl's and Opendoor Technologies heralded the possible return of a "meme stock" craze that could signal some over-exuberance in risk appetite, at least among retail investors. Meanwhile, the record-setting rally has lifted valuations to historically expensive levels. The S&P 500 was trading at 22.6 times earnings estimates, well above its long-term average P/E ratio of 15.8, according to LSEG Datastream, which could make the market vulnerable to disappointments in the coming week. Higher tariffs on the European Union and many other countries could take effect on August 1. Trump had paused many of the most severe of his reciprocal tariffs in April, following the bout of extreme market volatility. "There is a particular belief and conviction that the market has that the administration just won't be as aggressive as they've been threatening because of what was experienced in early April," said Kevin Gordon, senior investment strategist at Charles Schwab. "The next hurdle in the trade (situation) is really to see what sticks." FED OFFICIALS AWAIT TARIFF IMPACT The Fed is widely expected to hold interest rates steady in its monetary policy decision on Wednesday, as central bank officials want more data to determine if tariffs are worsening inflation before they ease rates further. But tensions between the White House and the central bank over monetary policy have heightened, with Trump repeatedly denouncing Fed Chair Jerome Powell for not cutting rates. Two of the Fed Board's Trump appointees have articulated reasons for supporting a rate cut this month. A packed week of corporate results includes Apple, Microsoft, Amazon and Facebook parent Meta Platforms, four of the "Magnificent Seven," whose stocks heavily influence benchmark indexes because of the companies' massive market values. With about 30% of S&P 500 companies having reported results, overall second-quarter earnings are on track for a 7.7% increase from a year ago, according to LSEG IBES. That would beat a 5.8% estimated rise on July 1. The week ends with the monthly U.S. employment report on Friday. Employment in July is expected to have increased by 102,000 jobs, according to Reuters data as of Thursday, after rising by 147,000 jobs in June. "We've had relatively strong economic data that almost shows a modest re-acceleration in the economy in June and I think markets are priced to reflect this re-acceleration," Miskin said.
Yahoo
6 days ago
- Business
- Yahoo
Tariffs, Fed, tech results headline jam-packed markets week
By Lewis Krauskopf NEW YORK (Reuters) -A looming U.S. deadline for more severe global tariffs is among a barrage of upcoming events threatening to disrupt an increasingly calm U.S. stock market that has set a string of all-time highs. President Donald Trump has extended a deadline to August 1 for when higher levies will take effect on an array of trading partners unless deals are struck. That could boost market volatility heading into next Friday. Much more is on the calendar that could move markets. Investors will watch the Federal Reserve's monetary policy meeting, the monthly U.S. employment report and earnings reports from megacap companies Apple, Microsoft and Amazon. "There is going to be a lot to digest for markets into next week," said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. "Expectations from the markets have gone up relative to several months ago," Miskin said. "So it's just going to be another big week for trying to meet loftier expectations." RECORD HIGHS, FALLING VOLATILITY The benchmark S&P 500 kept tallying new all-time highs during the week. Equities have recovered from a plunge after Trump's April 2 "Liberation Day" tariff announcement set off fears of a recession that have since ebbed. The S&P 500 has surged 28% since its low for the year a week later, while the tech-heavy Nasdaq Composite has jumped 38% in that time. "We just got three years of return in three and a half months," said Chris Galipeau, senior market strategist at the Franklin Templeton Institute. "The equity market needs to consolidate this move." Market volatility measures have eased considerably. The Cboe Volatility Index spiked to 60 in April, but has been below its long-term median of 17.6 for most of July and on Wednesday posted its lowest close in five months. However, pockets of volatility have emerged in the past week. Eye-popping gains in highly shorted stocks such as Kohl's and Opendoor Technologies heralded the possible return of a "meme stock" craze that could signal some over-exuberance in risk appetite, at least among retail investors. Meanwhile, the record-setting rally has lifted valuations to historically expensive levels. The S&P 500 was trading at 22.6 times earnings estimates, well above its long-term average P/E ratio of 15.8, according to LSEG Datastream, which could make the market vulnerable to disappointments in the coming week. Higher tariffs on the European Union and many other countries could take effect on August 1. Trump had paused many of the most severe of his reciprocal tariffs in April, following the bout of extreme market volatility. "There is a particular belief and conviction that the market has that the administration just won't be as aggressive as they've been threatening because of what was experienced in early April," said Kevin Gordon, senior investment strategist at Charles Schwab. "The next hurdle in the trade (situation) is really to see what sticks." FED OFFICIALS AWAIT TARIFF IMPACT The Fed is widely expected to hold interest rates steady in its monetary policy decision on Wednesday, as central bank officials want more data to determine if tariffs are worsening inflation before they ease rates further. But tensions between the White House and the central bank over monetary policy have heightened, with Trump repeatedly denouncing Fed Chair Jerome Powell for not cutting rates. Two of the Fed Board's Trump appointees have articulated reasons for supporting a rate cut this month. A packed week of corporate results includes Apple, Microsoft, Amazon and Facebook parent Meta Platforms, four of the "Magnificent Seven," whose stocks heavily influence benchmark indexes because of the companies' massive market values. With about 30% of S&P 500 companies having reported results, overall second-quarter earnings are on track for a 7.7% increase from a year ago, according to LSEG IBES. That would beat a 5.8% estimated rise on July 1. The week ends with the monthly U.S. employment report on Friday. Employment in July is expected to have increased by 102,000 jobs, according to Reuters data as of Thursday, after rising by 147,000 jobs in June. "We've had relatively strong economic data that almost shows a modest re-acceleration in the economy in June and I think markets are priced to reflect this re-acceleration," Miskin said. Sign in to access your portfolio
Yahoo
18-07-2025
- Business
- Yahoo
Industrial sector's gains to be tested as earnings ramp up
By Lewis Krauskopf NEW YORK (Reuters) -The industrial sector has led the way for U.S. equities during a topsy-turvy year on Wall Street, but its strength will be tested as earnings season heats up. S&P 500 industrials, which include aerospace companies, electrical equipment and machinery makers, transportation firms and building products companies, have gained 15% so far in 2025. That's the best year-to-date performance of the S&P 500's 11 sectors and more than double the gain of the overall index. Momentum for the industrials sector and the broader market will be in focus with a heavy upcoming week of second-quarter earnings, which includes reports from more than one-fifth of the S&P 500, led by Alphabet and Tesla, the first of the "Magnificent Seven" megacap tech and growth companies to report. The S&P 500 has surged 26% since April, as investors shook off fears about a recession which had stemmed from President Donald Trump's "Liberation Day" tariff announcement. This earnings season "seems to be especially important because of the rebound that the market has had," said Chuck Carlson, chief executive officer at Horizon Investment Services. "I would think that that has built in a fair amount of optimism in terms of earnings." A number of industrials will be in the earnings spotlight as well. Aerospace and defense stocks have boosted the sector's performance this year, driven by heightened geopolitical tensions in the Middle East and Ukraine and fresh spending commitments by Germany and other nations. The S&P 500 aerospace and defense industry group has surged 30% this year. Defense companies to report in the coming week include RTX, Lockheed Martin and General Dynamics. GE Aerospace, whose shares have soared about 55% this year, raised its 2025 profit forecast on Thursday. Another industrial company spun off from legacy General Electric last year, GE Vernova, has seen its shares skyrocket over 70% this year, making it the best-performing industrial sector stock. The power equipment maker's results are due Wednesday. The push for reshoring infrastructure and expansion of artificial intelligence, which has lifted demand for cooling systems and factory automation, are two themes that have supported a number of stocks in the industry, including Eaton and Rockwell Automation, said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. Another stock that has supported the industrial sector this year: Ride-hailing giant Uber, whose shares are up roughly 50%. "Unlike many non-Tech groups, there are a lot of solid stories here that don't rely on macro forces to deliver solid forward returns," Nicholas Colas, co-founder of DataTrek Research, said in a note on Wednesday. Large cap industrials still look attractive despite the group's recent run, Colas said. Indeed, while industrials have been viewed historically as closely tied to the fortunes of the economy, declines for a number of growth-cycle-linked stocks have weighed on the sector's performance. Shares of package delivery firms UPS and FedEx have posted sharp declines, while airlines including United Airlines and trucking companies such as JB Hunt Transport Services are also negative for the year. "There are economically sensitive (areas) within industrials that are not doing well," said Walter Todd, chief investment officer at Greenwood Capital. Other industrial companies slated to report in the coming week are Honeywell, Union Pacific and United Rentals. Beyond earnings, Wall Street will continue to focus on any developments on trade ahead of August 1, when higher U.S. tariffs on numerous trading partners are set to take effect. Investors will also be sensitive to news on the Federal Reserve, with Fed Chair Jerome Powell facing fresh pressure from Trump to resign as the president presses the central bank to lower interest rates. The Fed's next monetary policy meeting is July 29-30. The S&P 500 has climbed about 7% so far this year. The market has shown resilience despite "an incredible amount of uncertainty," said Eric Kuby, chief investment officer at North Star Investment Management Corp. "We continue to be surprised at how well stocks are trading given a lot of what would seem to be significant headwinds," Kuby said.
Yahoo
17-07-2025
- Business
- Yahoo
Analysis-Lofty US stock market valuations bank on earnings strength
By Lewis Krauskopf NEW YORK (Reuters) -With Wall Street's surge to record highs, the U.S. stock market looks nearly as expensive as ever, and investors are debating whether the lofty valuations are a bearish signal or justified by the technology-heavy market's profit outlook. Few investors would argue the broad stock market is cheap. Since late last month, the benchmark S&P 500 has traded above 22 times its expected earnings over the next year, according to LSEG Datastream. That's a price-to-earnings level the index has ascended to only about 7% of the time over the past 40 years. Determining appropriate market valuations could help investors understand how expensive stocks could get or how deeply they might fall, especially if there are renewed recession concerns. Whether current valuations are an imminent sell signal remains to be seen. Investors say the U.S. stock market can trade at elevated levels for an extended period of time. Some investors believe a number of structural changes could justify higher stock valuations, including greater representation in indexes from tech companies that generate massive profits. "By pretty much every historical metric (the market's valuation) is rich," said Keith Lerner, co-chief investment officer at Truist Advisory Services. "The question investors are grappling with is, is it warranted?" The S&P 500 has soared 25% since April, as investors grew less fearful that President Donald Trump's "Liberation Day" tariffs would cause a recession. The index has gained 6% so far in 2025, and over 60% in the past three years. As of Tuesday, the S&P 500's forward P/E ratio was 22.2, according to LSEG Datastream. That level is over 40% above the index's 40-year average of 15.8 and about 20% above its 10-year average of 18.6. A metric comparing price to expected sales shows the S&P 500 trading over 60% above its average of the past 20 years, according to Datastream. "On the broadest basis, the market has clearly got a valuation headwind relative to where it has been in history," said Patrick Ryan, chief investment strategist at Madison Investments. Investors debate the relevance of historical comparisons. The bigger presence in indexes of technology and tech-related companies, which tend to carry higher valuations, drives up the P/E ratio, while the profit strength of the largest companies also means the index could deserve higher valuations, investors said. The S&P 500's operating profit margin stood at 12% at the end of 2024, up from 9% in 2014, according to S&P Dow Jones Indices. Other potential justifications for higher valuations include regular buying of equities from 401(k) and other retirement plans, and lower fees for index funds easing access to stocks. While studies show elevated valuations suggest diminished returns over the longer term, they are not always the best "timing tools" for determining the market's near-term direction, said Ed Clissold, chief U.S. strategist at Ned Davis Research. Still, Clissold said, "a lot of good news is priced into stocks at these levels." In the April swoon, the S&P 500's P/E ratio sank to 17.9; in 2022's bear-market drop, driven by spiking interest rates, the P/E fell as low as 15.3. Indeed, investors are wary that current valuations make stocks particularly susceptible to disappointments. One worry: Washington could fail to strike deals with trading partners ahead of August 1, when higher U.S. levies on numerous countries are set to start. Another shock could be the early departure of Federal Reserve Chair Jerome Powell, whom Trump has persistently pressured to leave. Corporate results also pose a test. Second-quarter reports are kicking off with S&P 500 earnings expected to have increased 6.5% from the year-earlier period, according to LSEG IBES. Wall Street increasingly is focused on next year's profit potential, with S&P 500 earnings expected to rise 14% in 2026. "Investors seem somewhat convinced that the S&P is going to generate about 10% earnings growth for a few years after this year," said David Bianco, Americas chief investment officer at DWS Group. "The equity market has become fairly dismissive of any kind of significant recession risk." Some investors say that if artificial intelligence adoption broadly benefits the economy, "then maybe the valuations would be justified because the earnings growth the next few years could be substantial," Clissold said. To be sure, some investors are investing more in relatively cheaper areas such as small caps and international stocks. Ryan and others point to higher yields on U.S. government bonds, seen as risk-free if held to term, as one factor dimming the allure of stocks. The benchmark 10-year yield is around 4.5%, well above its level for much of the past 15 years. "There are alternatives out there for you to move your capital to," Ryan said. Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said the firm is recommending clients trim equities in areas including industrials and consumer discretionary sectors, expecting broadly slowing earnings growth in coming months before accelerating. The firm has a year-end S&P 500 target of 6,000, about 4% below current levels. "Valuation-wise, stocks are pretty lofty," Wren said. Still, he added, determining a fair valuation is trickier than it has been. "Where is the line in the sand between expensive and not expensive?" Wren said. "It's harder to determine that."
Yahoo
11-07-2025
- Business
- Yahoo
Earnings, inflation data confront resilient US stocks rally
By Lewis Krauskopf NEW YORK (Reuters) -A rally that has taken U.S. stocks to record highs will be tested in the coming week by the kick-off of corporate earnings season and a key inflation report as investors hope to learn more about the economic fallout from tariffs. The S&P 500 is little changed so far this week, but the benchmark stock index has surged 26% since April to all-time high levels. Stocks this week largely shrugged off President Donald Trump's threats of more aggressive tariffs on over 20 countries set to take effect August 1. Trump also announced plans for higher levies on copper, pharmaceuticals and semiconductors. "Investors are looking toward the end of the year into next year where fundamentals are better, and they are willing to look through some short-term uncertainty as they get there," said Chris Fasciano, chief market strategist at Commonwealth Financial Network. After a strong first-quarter reporting season helped lift stocks, analyst estimates for second-quarter results have weakened. S&P 500 companies are expected to have increased profits by 5.8% from the year-earlier period, down from an expectation of a 10.2% gain on April 1, according to LSEG IBES. The percentage of S&P 500 companies beating consensus estimates rose to 78% in the first quarter after the rate had declined the prior three quarters, Ned Davis Research analysts said. "Another reading in the upper 70s would suggest that companies have a grasp not only on tariffs, but also on the broader macro environment," the Ned Davis analysts said in a note. Reports from banks will dominate the week, including results from JPMorgan Chase, Bank of America and Goldman Sachs. Among the other major companies reporting next week are Netflix, Johnson & Johnson and 3M. In focus will be whether executives indicate if they are able to forecast and make decisions in areas such as capital investment and hiring despite the still-shifting trade backdrop, Fasciano said. "The uncertainty hasn't gone away, but I'm curious to see how much of the uncertainty they feel they have a better understanding of in terms of longer-term plans," Fasciano said. The impact of tariffs will also be at issue with the consumer price index for June, due on Tuesday, which will shed light on inflation trends. CPI is expected to increase 0.3% on a monthly basis, an acceleration from the prior month, according to economists polled by Reuters. A busy week of economic data will also be highlighted by monthly retail sales on Thursday. Investors are eager for the Federal Reserve to resume interest rate cuts, but central bank officials have cited worries that tariffs will drive inflation higher as reasons for holding off on changing monetary policy. The S&P 500 is up nearly 7% in 2025, just over halfway through the year. In the latest sign of positive stock momentum, Nvidia Corp this week became the first publicly traded company to hit $4 trillion in market value, fueled by a massive run for AI chipmaker's stock price. Stocks have rebounded after plunging in April following Trump's "Liberation Day" announcement of sweeping global tariffs. This past Wednesday was expected to be a key deadline, marking the end of Trump's pause on many of the harsh "reciprocal" tariffs he unveiled in April. This week, he launched an array of levies, many scheduled to take effect on August 1. Still, most investors appear to be banking on the U.S. avoiding higher tariff rates as Washington strikes deals in coming weeks with trading partners such as Japan and South Korea, said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "That's what the market has built in," Saglimbene said. "If we don't get that, then I think there is probably some risk that we would see some higher near-term volatility if the White House actually implements some of these aggressive tariff measures."
