market news Archives – Page 94 of 116

Pricey Stocks, Prudent Moves: A Historical Lens on Market Expensiveness

John Paul / November 11, 2023

The stock market isn’t just expensive; it’s alarmingly pricey. Nevertheless, historical trends suggest the potential for significant gains from its current level. In the year-to-date, the S&P 500 has surged nearly 15%, propelled by expectations that the Federal Reserve will refrain from further interest-rate hikes due to a declining inflation rate. Additionally, optimism around artificial intelligence boosting Big Tech stocks has played a role. Currently, the S&P 500 trades at around 18 times the aggregate earnings per share expected from its component companies over the next 12 months, well above the historical average of about 15 times. Yet, this ratio doesn’t fully capture the true extent of stock expensiveness, especially considering past instances where it has remained above 20 for extended periods. The valuation of stocks is closely tied to interest rates. With the index trading at 18 times earnings, investors can expect an annual per-share profit of about $5.50 for every $100 invested. This represents just a 1% premium over the 4.5% offered by holding safe 10-year Treasury debt, indicating a historically low equity risk premium. If the equity risk premium were at its long-term average, the earnings yield on the S&P 500 would be 7.5%, equivalent to the index trading at 13.3 times earnings—a clear sign of the stock market’s alarming expensiveness. However, historical data suggests that when the equity risk premium is exceptionally low, stocks tend to experience double-digit growth over the following year. Currently, with the premium hovering between zero and 1%, the average expected move for the S&P 500 in the next year is just over a 12% gain, according to RBC. Contrary to historical patterns, the equity risk premium is not negative, indicating that stocks yielding less than the S&P 500 are not leading to a decline in the index in the following year. Investors are optimistic about future earnings, confident that they will surpass Wall Street predictions. Factors such as sustained economic growth, defying expectations of a recession, and expectations of double-digit annual EPS growth in Big Tech contribute to this optimism. If this positive scenario materializes, analysts will likely revise their earnings forecasts upward. This could result in a lower forward price/earnings multiple for the S&P 500, making the market appear less expensive. Furthermore, as bond yields potentially drop, the earnings yield would rise, further increasing the equity-risk premium. Investors are already contemplating how to position themselves for this potential scenario, exploring which stocks to own if yields have peaked. The question remains: Can stocks continue to rally? It’s a reasonable expectation given the current dynamics. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

Choppy Waters Ahead: U.S. Stock Futures Wrestle with Prolonged Rate Pressures

John Paul / November 10, 2023

U.S. stock futures encountered obstacles on Friday because of a disappointing bond auction and recent signals suggesting that interest rates might stay high for a long time. As a result, the promising performance of major stock indexes came to a temporary halt. How stock-index futures are trading On Thursday, the Dow industrials, S&P 500, and Nasdaq Composite all saw decreases. The Dow closed at 33,891.94 after dropping 220.33 points or 0.7%, while the S&P 500 closed at 4,347.35 after falling by 35.43 points or 0.8%. The Nasdaq Composite had the biggest decrease, closing at 13,521.45 after dropping 128.97 points or 0.9%. Market drivers The S&P 500 and Nasdaq Composite’s longest winning streaks since November 2021 were halted on Thursday due to a poorly received $24 billion sale of 30-year Treasury bonds. Bond yields saw a small decline on Friday. The yield on the 30-year Treasury note, identified as BX:TMUBMUSD30Y, dropped by 2 basis points to 4.739%, in contrast to Thursday’s rate of 4.777%. Thursday’s surge in yield was nearly the biggest one-day rise since June 2022. The potential influence that a ransomware attack on the U.S. branch of the Industrial & Commercial Bank of China had on the Treasury market in the United States was unclear in terms of how it would affect the Treasury auction. Investors were reviewing the recent increase in the stock market, which was influenced by the anticipation of the Federal Reserve ending its interest rate hikes. This shift in sentiment came after Federal Reserve Chairman Jerome Powell cautioned against being swayed by short-term inflation changes and mentioned that achieving the desired 2% goal was not certain. Pierre Veyret, who is a technical analyst at ActivTrades, said that the sudden change to a more assertive position goes against the earlier recommended cautious approach that was talked about in the previous FOMC meeting. As a consequence, investors are unsure and do not have a clear understanding of where monetary policies are heading in the future. Investors are advised to not make investment decisions based on gossip and wording, but rather wait for clear instructions and actions from central banks. As a result, stock markets might become more stable with less uncertainty, as investors delay making significant changes to their risky investments until the release of next week’s consumer price data in the US, European Union, and UK. The United States will release the consumer price data for November to the public next Tuesday. Investors will closely monitor the remarks of different members from the Federal Reserve on Friday. Lorie Logan, the President of the Dallas Fed, is set to speak at 7:30 a.m., followed by Raphael Bostic, the President of the Atlanta Fed, at 9 a.m., and Mary Daly, the President of the San Francisco Fed, at 1 p.m. In addition, the University of Michigan will announce its preliminary consumer sentiment survey for November at 10 a.m. in Eastern time. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

Stocks Stall as Wall Street Contemplates Fed’s Next Move

John Paul / November 9, 2023

Stock market futures on Wall Street held relatively steady on Thursday as investors closely observed Federal Reserve policymakers for additional insights into interest-rate strategies following a series of conflicting signals. The S&P 500 futures remained close to the previous day’s levels after the index narrowly secured its eighth consecutive day of gains on Wednesday, marking the longest streak in two years. Dow Jones Industrial Average (^DJI) futures showed a modest increase of approximately 0.1%, while contracts associated with the tech-heavy Nasdaq 100 (^NDX) experienced a slight decline of around 0.1%. Investors are eagerly anticipating potential indications from Jerome Powell regarding the likelihood of a rate cut during his upcoming speech, particularly after the Fed chair refrained from discussing monetary policy during his Wednesday appearance. Recent statements from central bankers have presented a range of viewpoints, contributing to uncertainty among investors who previously believed that the Fed had completed its hikes. As the earnings season nears its end, a fresh set of corporate reports is anticipated. Disney (DIS) shares surged after surpassing quarterly earnings estimates in after-hours trading, likely influenced by a tentative agreement between Hollywood studios and striking actors. In contrast, Arm (ARM) shares declined as investors assessed its initial post-IPO results, coupled with SoftBank, the chip designer’s backer, reporting a quarterly loss of $6.2 billion. Oil prices saw a slight recovery within the realm of commodities after hitting a three-month low due to concerns about global consumption. West Texas Intermediate crude futures (CL=F) and Brent crude futures (BZ=F) each experienced an increase of approximately 0.5%, trading at around $76 and nearly $80 per barrel, respectively. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

S&P 500 Futures Step Back after Record-Breaking Momentum

John Paul / November 8, 2023

U.S. equity index futures saw a small decrease on Wednesday as traders reviewed the situation following the longest stretch of consecutive gains in the last two years. How are stock-index futures trading On Tuesday, the Dow Jones Industrial Average rose by 57 points, indicating a 0.17% gain and pushing it to a total of 34153. Similarly, the S&P 500 witnessed growth of 12 points, which translates to a 0.28% increase, resulting in a new figure of 4378. Furthermore, the Nasdaq Composite experienced a gain of 121 points, signifying a 0.9% rise, and reaching a total of 13640. What’s driving markets In the last seven trading sessions, the S&P 500 index has seen consistent growth, making it the longest stretch of continuous gains in the past two years. Throughout this time, it has increased in value by 6.3%, with notable contributions from well-known technology stocks. Similarly, the Nasdaq Composite, which is recognized for its extensive presence of tech companies, has also had a winning streak lasting eight days, resulting in an 8.3% rise in value. This performance is the highest it has achieved in the past two years. After experiencing a notable increase, traders decided to pause, resulting in a small drop in equity index futures. Derren Nathan, who is in charge of studying stocks at Hargreaves Lansdown, clarifies that the recent decrease in the assumed costs of borrowing and the disappointing employment figures have created a sense of hope for upcoming reductions in interest rates. This sense of positivity has played a significant role in the recent advancements. Nevertheless, Nathan interjected and expressed his opinion that stocks could experience a pause as investors attempt to handle their expectations amidst potential interest rate reductions and mounting financial strains in the economy. This would not be the first occurrence where the market inaccurately predicted the Federal Reserve’s timing during a period of elevated interest rates. Tom Lee, the research chief at Fundstrat, justified the need for stocks to undergo a time of consolidation. This is a result of the considerable profits they have recently attained and the lack of any noteworthy macroeconomic updates during this week. Lee stated that stocks are expected to stay stable if there is no major macroeconomic news, given the unfavorable sentiments of both institutional and retail investors. Federal officials have a set date to provide their thoughts and opinions on Wednesday. This will involve Chair Jerome Powell, who will kick off the research conference by the Federal Reserve with an introductory statement at 9:15 a.m. Following that, New York Fed President John Williams will deliver the main speech at the same conference at 1:40 p.m. Moreover, Fed Vice Chair for Supervision Michael Barr will address the NAHB conference at 2 p.m. Lastly, Fed Vice Chair Phillip Jefferson will bring the research conference to a close by delivering the concluding remarks at 4:45 p.m. On Thursday, Powell’s speech is set to be closely observed. This Wednesday, Roblox, Warner Bros. Discovery, and Under Armour, among other companies, will disclose their earnings before the stock market opens. Later in the day, Walt Disney, AMC Entertainment, and Twilio will report their earnings after the market closes. Updates on the U.S. economy, including the wholesale inventories for September, will be announced on Wednesday at 10 a.m. Eastern time. Companies in focus John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

Assessing Trends: Bond Yields and Their Impact on Stock-Market Behavior

John Paul / November 7, 2023

The relationship between Treasury yields and the stock market is widely recognized. The recent surge in yields was largely blamed for a market downturn, leading the S&P 500 to slide over 10% from its late July peak, falling into correction territory by the end of last month. However, there was a marked shift last week. Yields on 10-year and 30-year Treasury notes saw their most significant decline since March, sparking a surge in stocks. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite recorded their most substantial weekly gains in 2023. The week concluded with the S&P 500 closing at 4,358.34. Investors are currently debating whether yields have hit their peak, which typically move in the opposite direction to Treasury prices. The burning question remains: will a clear peak in yields signal the revival of the 2023 stock market rally? As is often the case in financial markets, outcomes depend largely on the context. Analysts at U.K.-based Matrix Trade emphasized this uncertainty, noting that yields could reach a peak for various reasons, but not all outcomes would favor stocks. One positive scenario for stocks envisions a robust economy while inflation decreases, allowing the Federal Reserve to reduce interest rates without igniting inflation reminiscent of the 1970s. However, this scenario seems improbable without a significant rise in unemployment. Conversely, a potential recession could see yields and stocks declining simultaneously, similar to the periods of 2000-2002 and 2007-2009. Economists have faced challenges in accurately predicting the economy’s trajectory, citing the inconsistency in forecasts. The Matrix Trade analysts highlighted the difficulty in timing signals like the inversion of the yield curve, typically a reliable indicator of an impending recession, but with uncertain timing. To refine this signal, they suggested combining it with unemployment claims, anticipating that surpassing 250,000 first-time claims might signal a point of no return. While the future of the stock market remains uncertain, identifying the peak in yields might be clearer. The analysts consider the 4.33%-4.43% range as a significant inflection point for the 10-year Treasury note. Remaining within this range could mean the potential for the 10-year yield to exceed 5%. However, if this range is breached, it could indicate the end of the rally. The analysts also suggest the possibility of a broader correction, with the 10-year yield potentially declining to 2.5% to 3%, suggesting economic pressure and a potential recession. In summary, the current optimistic rally may face challenges, potentially hitting around 4,103 again early next year if stocks fail to continue their current momentum. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

Earnings Whispers in a Booming Market: Proceed Cautiously

John Paul / November 4, 2023

The volatility index hints at a period of calm, but recent corporate earnings have sparked unpredictability in individual stocks. Brace yourself for potential market turbulence making a comeback sooner than expected. The past week witnessed significant market upswings, with the S&P 500 index soaring by 5.9%, marking its most substantial increase since November 2022. The Dow Jones Industrial Average and Nasdaq Composite also surged by 5.1% and 6.6%, respectively. This surge followed the Federal Reserve’s decision to hold off on interest rate hikes and a notable slowdown in the labor market, as evident in the recent payrolls report. While the Cboe Volatility Index (VIX), a measure of expected S&P 500 volatility, declined to 14.9 from its peak of nearly 22 in October, this shift suggests a change in investor sentiment—from a brief panic to renewed confidence in the market. However, contrasting this are individual stocks’ reactions to earnings, showcasing significant volatility. Some companies, like Roku, Shopify, and Palantir Technologies, soared by more than 20% post-earnings, while others such as Paycom Software, ON Semiconductor, and Estée Lauder plummeted by 19% or more. Despite reduced market volatility, the response to earnings remains highly erratic. Companies surpassing earnings and sales expectations have seen only marginal stock increases, around 0.3%, on average. Conversely, those missing forecasts experienced a significant 4.8% decline—widening the disparity compared to historical averages. The concern arises from the fact that while earnings have mostly exceeded estimates, the market has already factored in this growth for the future. Spencer Hakimian, founder of Tolou Capital Management, highlights the risk if projected growth doesn’t materialize in the coming years. Instances like ON Semiconductor’s discouraging profit guidance, attributed to weakening automotive chip demand, resulted in a 22% stock drop. The trend of companies providing cautious forward guidance is a cause for concern, potentially adding to market volatility. The behavior of the bond market is currently influencing stock markets. Although the 10-year Treasury yield witnessed a significant decline, there remain worries about persistently high interest rates potentially impacting future earnings in 2024 and 2025, hinting at a possibly volatile market ahead. David Miller, co-founder of Catalyst Capital Advisors, foresees a higher VIX level in the near future, suggesting a bumpier market ride and calling for preparedness to navigate potential increased turbulence. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com