Morning Briefing

Is this the best the most bullish can do? A 3% upside for the S&P 500 by the end of the year?

Is this the best the most bullish can do? A 3% upside for the S&P 500 by the end of the year?

On Friday, June 14, Goldman Sachs upped its year-end target for the Standard & Poor’s 500 to 5,600 points from 5,200. The idea closed at 5473 on Monday, June 17, for the 30th record high of 2024. Goldman’s forecast puts the investment company at the same expected price level as UBS Investment Bank and BMO Capital Markets. They’r talking about a roughly 3% gain from here through the end of the year. Three points to consider about the forecast.

CPI inflation slows slightly keeping alive hopes for rate cut in 2024

CPI inflation slows slightly keeping alive hopes for rate cut in 2024

However, as all dedicated inflation watchers know, the Federal Reserve watches the core inflation rate and not the all-items rate. That index, which excludes more volatile food and energy prices, rose 0.2% month over month in May, after rising 0.3% month over month in April. The core index rose at a 3.4% rate over the last 12 months. While the dip in core inflation is surely encouraging to the Federal Reserve as it fights to get stubborn inflation down to the central bank’s target 2% rate, today’s data show a continued problem the housing prices. The shelter index–the stand-n for housing prices in this index–increased at a 5.4% annual rate in May. That accounted for over two-thirds of the total 12-month increase in inflation.

A big difference of opinion on Apple today–and I’d sell

A big difference of opinion on Apple today–and I’d sell

Traders and investors reacted to Apple’s (AAPO) AI announcements during the first days of the company’s World Wide Developers Conference with enthusiasm today sending the stock up 7.26% in June 11 trading. That’s a new all-time high for the stock. Technology analysts were at best mixed. Their more tepid response set the tone yesterday when the stock dropped 1.9%. Typical was this from KeyBanc Capital Markets analyst Brandon Nispel in a client note: Apple’s AI enhancements aren’t compelling enough for the average consumer to purchase a new device. I’m with the tech folks on this and today I made Apple a sell in my Special Report: Trade Wars! Trade Wars!

So much for that job market slowdown in May

So much for that job market slowdown in May

Employers added 272,000 jobs in May, the Bureau of Labor Statistics reported this morning. That number was well above the 185,000n projected by economists and even higher above the 175,000 in the April report. The financial markets were disappointed with the news since it pushed out the schedule for an initial interest rate cut from the Federal Reserve.A cut a the July 31 Fed meting has now been priced out by the market. The Standard & Poor’s 500 fell 0.14% today and the NASDAQ Composite dropped 0.23%

So much for that job market slowdown in May

And now they tell us: A day before the jobs report the BLS tells us that the employment numbers have been wrong

The Federal Reserve has been telling us over and over again that it’d decision on cutting interest rates depends on the data. Among other things, the Fed wants to see a steady slowdown in the employment market reflected in the data before it cuts interest rates. But what if the data have been wrong? For months? Today in its regular Quarterly Cent of Employment and Wages the Bureau of Labor Statistics raised just that possibility.

Slump in factory ISM raises question of how slow is too slow

Slump in factory ISM raises question of how slow is too slow

Be careful what you wish for. Financial markets have been hoping to see signs of a slowing U.S. economy that would let the Federal Reserve begin to cut interest rates. But after the Institute for Supply Management’s (ISM) manufacturing gauge fell 0.5 point to 48.7 in May, the weakest in three months, in data released on Monday, investors have begun to worry if this much of a slowdown is a good thing.

PCE inflation rose at slowest pace of 2024 in April

PCE inflation rose at slowest pace of 2024 in April

The Federal Reserve’s preferred measure of U.S. inflation–the core personal consumption expenditures (PCE) price index, which strips out volatile food and energy prices–rose 0.2% in April from March.That was the smallest advance in 2024, according to Bureau of Economic Analysis data out Friday. And there was more evidence of a slowing economy today.

It’s a concentrated Magnificent 7 market again

It’s a concentrated Magnificent 7 market again

Hedge funds’ exposure to the Magnificent Seven of Nvidia (NVDA), Apple (AAPL), Amazon (AMZN), Meta Platforms (META), Alphabet (GOOG), Tesla (TSLA), and Microsoft (MSFT) has reached a record high of approximately 20.7% of their total net exposure to individual U.S. stocks, according to a report from Goldman Sachs. The proximate cause of this surge is Nvidia’s recent consensus-beating earnings report, which renewed the frenzy around artificial intelligence stocks. Nvidia has added around $470 billion in market capitalization since that report. A slightly more long-term cause is that with the consensus projection for when the Federal Reserve will start cutting interest rates moving later and later in 2024, earnings growth is increasingly the only game in town when it comes to supporting higher stock prices.

Nvidia beats even the most optimistic earnings forecasts

Nvidia beats even the most optimistic earnings forecasts

Yesterday, May 22, after the market close, Nvidia (NVDA) crushed Wall Street projections for revenue and earnings for the company’s fiscal first quarter of 2025. Nvidia reported that revenue soared 262% year-over-year to a record $26 billion, marking an 18% quarter-over-quarter increase. Adjusted earnings per share climbed 461% to $6.12. The Wall Street consensus had called for revenue of $24.65 billion and earnings per share of $5.59. And it even beat the Wall Street “whisper number,” which in a bullish momentum situation like this runs considerably above the official consensus. Data center revenue hit a record $22.6 billion, up 427% year over year. Data center revenue represents 87% of Nvidia’s total sales. For the current fiscal second quarter of 2025 Nvidia told investors to expect sales of $28 billion, up 107% year over year.

Nvidia beats even the most optimistic earnings forecasts

Saturday Night Quarterback say, For the week ahead expect…

I’m expecting a key moment for momentum in a market that keeps setting new records on Wednesday, May 22, when Nvidia (NVDA) announces revenue and earnings for the company’s first fiscal quarter of 2025 and the quarter that ended in calendar April 2024. The consensus among Wall Street analysts is looking for the company to earn $5.17 a share. That would be a huge leap from 88 cents a share in the April 2023 quarter. The projections for revenue are every bit as optimistic.

CPI inflation hits the mark for April: Is this the start of another drop in inflation, finally

CPI inflation hits the mark for April: Is this the start of another drop in inflation, finally

Today, May 15, the April Consumer Price Index report dangled new hope in front of investors. The all-items index annual rate of inflation dropped to an annual 3.4% rate from 3.5% in March. The core index, which leaves out food and energy prices, fell to an annual rate of 3.6%, down from 3.8% in March. Those annual rates are still way above the Federal Reserve’s inflation target of 2%. But after three straight reports where the inflation rate came in above market expectations todays report, which hit projections right on the mark, came as good news. In recent weeks Wall Street has speculated that inflation is set to resume its downward course starting with the April report. And after stalling above 3.5%, annual inflation would resume its downward path.