S&P 500 Races to 30 All-Time Highs in 2024: Markets Conclude

(Bloomberg) — Stocks headed for all-time highs as big tech rallied despite a rise in Treasury yields, with traders bracing for a reading on retail sales and a host of keynote speakers. Federal Reserve.

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The S&P 500 was set to close at its 30th record high this year, though many analysts remained concerned about the market’s narrow breadth. Some Wall Street strategists rushed to raise their targets even as many hedge funds became increasingly cautious. Treasuries trimmed their June gains amid a flurry of corporate debt sales. Home Depot Inc. is selling $10 billion worth of bonds in the high-grade market.

Optimism over a resilient economy, improving corporate earnings and the likely start of rate cuts have pushed stocks up about 15% this year, with falling inflation and enthusiasm for artificial intelligence also pushing stocks higher. .

“We believe the S&P 500 could reach 6,000 by the end of the year, as the combination of better earnings and a rate cut or two is a turbo-charger for stock prices,” said James Demmert at Main Street Research.

The S&P 500 rose to around 5,480, with Tesla Inc. and Apple Inc. major earnings in megacaps. The Nasdaq 100 rose about 1.5% and neared the 20,000 mark. Micron Technology Inc. climbed to a record high as several firms raised their targets for the chipmaker. Broadcom Inc. jumped 6% Activist investor Starboard Value said it has built a stake in Autodesk Inc . worth over 500 million dollars.

French shares recovered after last week’s decline. However, the Stoxx Europe 600 Index was little changed after Citigroup Inc. downgraded the region’s stock values, citing “increased political risks” among other reasons.

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Citigroup strategists raised their 2024 forecast for the S&P 500 to 5,600, becoming the third Wall Street firm since Friday to upgrade its outlook. Continued positive earnings revisions and expanding earnings growth for S&P 500 non-technology companies fueled the target upgrade, wrote Citi strategists led by Scott Chronert.

In recent days, Julian Emanuel at Evercore raised his year-end forecast for the S&P 500 to 6,000, the highest among the top equity strategists tracked by Bloomberg. Goldman Sachs Group Inc. Strategists led by David Kostin raised their target to 5,600, reflecting Wall Street’s upbeat outlook for earnings growth and the US economy.

Meanwhile, hedge funds cut their gross short-term leverage, which measures their overall exposure to the market, by the most since March 2022, according to a note from prime brokerage Goldman Sachs. The move points to a more cautious stance by so-called smart money, the team wrote.

While there has been no shortage of headlines about the S&P 500’s record highs, the highs have been less important as a sign of market strength than as an impact on investor sentiment, according to Tim Hayes at Ned Davis Research.

“While record levels were reached by major benchmarks, breadth has weakened,” he said. “Standard records are not confirmed by most markets, sectors and stocks.”

Ahead of the latest reading on retail sales, traders also kept an eye on Fedspeak.

Fed Bank of Philadelphia President Patrick Harker said he sees a rate cut as appropriate for this year based on his current forecast, underscoring the message that high rates are likely to continue.

Investors are being warned that rates will stay higher for longer than they expected, with the median projection from Fed officials calling for an interest rate cut this year. And yet money is pouring into stocks that benefit from lower borrowing costs.

The question now for investors is what will the market do when the Fed eventually decides to cut? Historically, rate cuts have marked a key inflection point that has delivered strong capital returns — but only for cycles that weren’t caused by a recession, like this one.

“Improving inflation trends would lead to a more constructive policy outlook, which should be a tailwind for equities and fixed income,” said Jason Pride and Michael Reynolds at Glenmede. “Assuming all continues to go well with inflation along a moderate path over the summer, a September rate cut is likely on the table.”

Some stock market optimists have speculated that some of the roughly $6 trillion in money market cash is about to be reallocated to stocks and will give growth another boost.

But a growing number of fortune tellers at firms ranging from Morgan Stanley to Deutsche Bank AG are poking holes in that theory. With cash yields bountiful amid high interest rates, it’s no wonder that inflows into money market funds just hit another all-time high. However, there is little evidence to suggest that cash will move into riskier assets anytime soon.

“The meltdown and a flight to quality will likely dominate markets until the Fed clarifies the intent and timing of rate cuts,” said Robert Teeter at Silvercrest Asset Management. “That guidance could come as early as the Jackson Hole event in August.”

Many stocks are now becoming more sensitive to softer growth conditions, according to Morgan Stanley strategists led by Michael Wilson. They say some value/cyclical stocks are starting to focus more on earnings expectations and less on the impact of interest rates.

“This development is consistent with our consistent view that higher rates are a clear headwind for small caps, but lower rates do not provide a comparable benefit,” they wrote.

According to Bloomberg Intelligence strategists led by Gina Martin Adams.

“The correlation between the two asset classes was positive for most of the 20 years, suggesting that disinflation was the dominant regime,” they said. “The positive correlation historically meant that stocks tended to outperform yields as inflation largely coincided with growth.”

A shift in the correlation to negative could signal a significant long-term change in inflation conditions, BI strategists noted. Stocks maintained a negative correlation with yields through much of the 1980s and 1990s, when inflation hurt stocks.

Corporate highlights:

• Tesla Inc. has been given approval to test its advanced driver assistance system on some Shanghai roads, according to a person familiar with the matter — the next step in rolling out the feature to Chinese drivers.

• The US Federal Trade Commission sued Adobe Inc., alleging that the software company violated consumer protection laws by making it too difficult for consumers to cancel their subscriptions.

• While the crisis involves Boeing Co. After the near-catastrophic accident on a 737 Max 9 plane in mid-air, Chief Executive Dave Calhoun has kept a low profile in recent months. A Senate hearing on Tuesday will put him in place to protect his record and save his legacy as he prepares to step down later this year.

• Walt Disney Co.’s “Deadpool & Wolverine” will be released in Chinese cinemas next month, a win for the studio after Beijing banned previous blockbuster screenings at a time of chilly relations with the US.

• Cybercriminals are demanding payments of between $300,000 and $5 million each from 10 companies breached in a campaign that targeted Snowflake Inc. customers, according to a security firm assisting with the investigation.

• GameStop Corp. Chief Executive Ryan Cohen told investors that he is focused on achieving profitability at the ailing video game retailer and plans to avoid the “hype” that has driven the stock to extremes as part of the meme stock frenzy.

This week’s highlights:

• Australia’s rate decision on Tuesday

• Eurozone CPI, Tuesday

• US retail sales, business inventories, industrial production, Tuesday

• The Fed’s Thomas Barkin, Lorie Logan, Adriana Kugler, Alberto Musalem, Austan Goolsbee speak, Tuesday

• UK CPI, Wednesday

• June 11 holiday in the USA, Wednesday

• Key lending rates in China on Thursday

• Consumer confidence in the Eurozone, Thursday

• UK BOE rate decision on Thursday

• US housing starts, initial jobless claims on Thursday

• Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday

• US Existing Home Sales, Conf. The main index of the board, Friday

• Fed Thomas Barkin of the Fed on Friday

Some of the main movements in the markets:

INVENTORY

• The S&P 500 was up 0.9% as of 2:55 p.m. New York time.

• Nasdaq 100 rose 1.4%

• The Dow Jones Industrial Average rose 0.5%

• MSCI World Index rose 0.6%

currencies

• The Bloomberg Dollar Spot Index is little changed

• The euro rose 0.3% to $1.0736

• The British pound rose 0.1% to $1.2706

• The Japanese yen fell 0.2% to 157.71 per dollar

Cryptocurrencies

• Bitcoin rose 0.7% to $66,959.82

• Ether fell 1.2% to $3,554.94

BONDS

• The 10-year Treasury yield advanced six basis points to 4.28%

• Germany’s 10-year yield advanced five basis points to 2.41%

• Britain’s 10-year yield advanced six basis points to 4.11%

wares

• West Texas Intermediate crude rose 2.5% to $80.40 a barrel

• Gold in the country fell 0.6% to $2,318.02 an ounce

This story was produced with the help of Bloomberg Automation.

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