The final trading week of the month, quarter and first half of 2024 will treat investors to a dash for top-notch results that will mark key inflation indicators, paltry corporate earnings and another consensus-breaking period for markets.
On Friday morning, the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, will be released for May, showing that “core” prices, which exclude food and energy, rose 0.1% last month, the slowest monthly increase since November.
On an annualized basis, core PCE inflation is expected to rise to 2.6%, the lowest level since March 2021.
Earlier this month, the Consumer Price Index (CPI) Inflation continued to declineThe report strengthened investors’ expectations that the Federal Reserve will cut interest rates later this year. According to a Fed forecast released on June 12, the central bank will Expected to cut interest rates at least once in 2024.
Earnings announcements are still looming this week, with FedExFalcon) Tuesday, Micron (M) on Wednesday, Nike (NKE) will be the highlight.
Micron’s report will likely be most closely watched as a sign of how robust AI demand is across the company’s portfolio. Nike’s report comes at a critical time for the retailer, which has seen its shares fall 11% this year as it struggles to counter competition from rivals like Adidas and relative upstarts like On in its core athletic shoe market.Onon) and Deckers’ (deck) Hoka brand.
Outside market hours, investors will also be focused on Thursday night’s presidential debate between President Biden and former President Donald Trump, the first of two currently scheduled to take place between the two candidates.
Another AI Rally
AI trading took the markets by storm last year, with the S&P 500 up more than 22% and the Nasdaq up nearly 40%.
Towards 2024, A popular call on Wall Street The idea was that this rally would widen and engulf laggard sectors of the market that had been overlooked in last year’s “AI everything” rally.
But the first few months of 2024 saw little change.
While the performance gap between the S&P 500 and Nasdaq has narrowed, with the S&P 500 up more than 14% this year and the Nasdaq up more than 17%, the Dow continues to lag, gaining just 3.8% so far in 2024.
Meanwhile, Nvidia (NVDA), Super Microcomputer (SMCI), Broadcom (AVGO), and the aforementioned Micron, have been among the best-performing stocks in the S&P 500 so far this year. AI-related energy stock Vistra (VST) and Constellation (CEG) has also been one of the index’s best performers so far this year.
“The rally in the first half of the year demonstrated the value of ‘staying the status quo,'” John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, wrote in a note.
“In our view, the sharp reversal in bond yields in the second half of 2023 and the associated rally in equity prices since then demonstrates the importance of investor patience and adhering to portfolio diversification. Equities rallied further in the second quarter despite signs of an economic slowdown. The fourth quarter equity market rally continued into the first half of the year, highlighting the need to stay invested.”
Four themes for 2024
In the modern market, for better or worse, earnings season never actually ends.
But as Wall Street strategists look to wrap up first-quarter results before second-quarter earnings are released after the July 4 holiday, Dubravko Lakos-Buhas and JPMorgan’s equity strategy team highlighted four key themes in a client note on Friday morning.
The first, of course, is AI.
AI investments, strategies and mentions of all kinds were sprinkled into earnings calls throughout the quarter. Data provided by FactSet Indicated 199 of S&P 500 companies mentioned AI during earnings conference calls through late May.
The JPMorgan team noted that companies “remain positive on the AI theme, announcing additional capex spending, new AI models, and updates on ongoing organizational restructurings geared toward AI product offerings.”
The second topic is weight loss drugs.
The best-performing stocks in the S&P 500 this year are primarily AI-related stocks. Eli Lilly and Company is in 8th place with a 52% increase since the start of the year.Lily), makers of the popular weight loss drugs Mounjaro and Zepbound.
Eli Lilly currently has a market capitalization of over $800 billion and is the eighth-largest company in the S&P 500.
The U.S. consumer is the third major theme of earnings season.
Specifically, JPMorgan said it has “growing concerns about levels of resilience given consumer backlash against pricing, trading down and value-seeking behavior, particularly among lower-income consumers.”
Walmart (World Trade Management) CFO John David Rainey He told Yahoo Finance in May“I can see that purse strings are still loose. [customers are] I’m still looking for value.”
Last week, May retail sales data Sales growth slowed The stronger-than-expected sales figures were followed by a sharp downward revision to April sales figures. At least one economist said the report was ” [consumers] I’m having a bit of a hard time.”
Consumer spending accounts for roughly two-thirds of U.S. GDP growth, so how cautiously — or boldly — shoppers are reaching for their wallets is always important information for investors.
The final theme mentioned by the JPMorgan team was “expense management,” which, like AI, is another theme that has been around for the past few years.
In 2022, rising interest rates caused tech stocks to crash. Layoffs began to spread across the industry. The team aggressively acquired talented players in the 2020-21 season. Cost reductions to continue into 2023 This has raised investor expectations regarding profit margins through 2024.
And management still has plenty of cover from the broader environment to continue reducing headcount and other cost cuts.
“We also remain focused on our long-term efforts to durable realign our cost base,” Alphabet (Google) CEO Sundar Pichai told investors in late April:
“We continue to manage headcount growth and align teams with our highest priority areas. This will enable us to make faster decisions, reduce layers and invest in the right areas.”
Alphabet at the end of the first quarter Employed That’s about 10,000 fewer than a year ago. Earlier this month, the tech giant The company announced it has hired a new CFO..
Weekly Calendar
Monday
Economic data: Dallas Fed Manufacturing Index, June (Expected -14.9, Previous -19.4)
Revenue: No notable earnings announcements are scheduled.
Tuesday
Economic data: S&P CoreLogic Case-Shiller Home Prices, April (+0.33% from previous); FHFA Home Price Index, April (+0.1% from previous); Conference Board Consumer Sentiment Index, June (forecast: 100, previous: 102); Richmond Fed Manufacturing, June (previous: 0)
Revenue: FedEx (Falcon),carnival(CCL), TD Synex (SNX), Progress Software (PRGS)
Wednesday
Economic data: MBA Mortgage Applications, week of June 21 (+0.9% previous); New Home Sales, May (+2.5% expected, -4.7% previous)
Revenue: Micron (M),blackberries(B.B.), General Mills (Geographic Information System), Paychex (PayX), Levi Strauss (Levi), Jeffries (Jeff), Concentrix (CNCX), AeroVironment (AVAV), Miranor (MLKN)
Thursday
Economic data: Q1 GDP, 3rd Estimate (expected +1.4% annual rate, previous +1.3%); Initial Jobless Claims for the week of June 22 (previous 238,000); Durable Goods Orders for May (expected +0.1%, previous +0.6%); Pending Home Sales for May (previous -7.7%); Kansas City Fed Manufacturing Activity for June (previous -2%)
Revenue: Nike(NKE), Walgreens (WBA), McCormick (M.K.C.), Acuity Brands (ah), American outdoor brand (AOUT)
Friday
Economic data: PCE Inflation, MoM, May (+0% Forecast, +0.3% Previous). PCE Inflation, YoY, May (+2.6% Forecast, +2.7% Previous). Core PCE Inflation, MoM, May (+0.1% Forecast, +0.2% Previous). Core PCE Inflation, YoY, May (+2.6% Forecast, +2.8% Previous). Personal Income, May (+0.4% Forecast, +0.3% Previous). Personal Spending, May (+0.3% Forecast, +0.2% Previous). University of Michigan Consumer Sentiment, June (65.8 Forecast, 65.6 Previous)
Revenue: No notable earnings announcements are scheduled.
Correction: An earlier version of this article listed Jonathan Golub as Oppenheimer Asset Management’s chief market strategist, rather than John Stoltzfus. Golub is a strategist at UBS.