With stocks set to close out a strong first half of 2024, investors have only one more important inflation hurdle to clear in the week ahead: May’s personal spending report. Stocks have defied all expectations mid-year. While many investors came into 2024 predicting limited gains for stocks, an AI-fueled surge — as well as signs of easing inflation — have pushed stocks to new highs. Nvidia, which is up more than 150% this year, this week temporarily overthrew Microsoft as the world’s most valuable public company. On Friday, the S&P 500 was hovering near an all-time high, after briefly passing 5,500 this week for the first time ever. The broad market index has advanced nearly 15% this year and posted a record 31 closes. NVDA YTD mountain Nvidia Many investors think the stock could see even more gains to start the second half, citing a string of recent macroeconomic data that suggest a strong fundamental backdrop for the stock. “On balance, we’re seeing the trend toward slower inflation, but at a gradual pace, and that’s Goldilocks,” said Terry Sandven, chief equity strategist at US Bank Asset Management. “And that has helped support valuations to where they are today, and in our view, warrants even higher equity prices.” Next week’s personal spending data, the Federal Reserve’s preferred gauge of inflation, may show whether that overall picture is intact. Confirming Inflation Traders predicting 2024 to end on a high note point to inflation and interest rate prospects rising more as the year progresses. After a hot entry during the first quarter of 2024, price pressures have recently begun to ease. May’s consumer price index, for example, showed no increase from last month, which last month’s producer price index, a measure of wholesale prices, unexpectedly fell from the previous reading. May’s PCE, which captures the prices consumers pay for a wide range of goods and services, is expected to reinforce these findings. Economists polled by FactSet forecast that core PCE, which excludes volatile food and energy prices, rose 2.6% last month from the year-earlier period, up from 2.8% last month. A reading that comes in line with expectations, or even lower, could bolster investors’ hopes for a Fed rate cut this year. While the central bank indicated at its last policy meeting that it expected just one cut this year, investors are hoping that softer inflation and a cooling economy could signal further cuts to come. The CME FedWatch tool showed markets were last pricing in the likelihood of two-quarter percentage point declines this year, starting in September. Market Confidence Further confirmation of an improved inflation picture would boost sentiment, but even if investors haven’t lacked confidence recently. A global survey of fund managers by Bank of America Securities this week suggested investors are the most bullish they’ve been since November 2021, preferring to allocate to stocks rather than cash, which is at its lowest three years. Wall Street strategists are raising their year-end targets. This week, Goldman Sachs strategist David Kostin raised his year-end S&P 500 price target to 5,600 from 5,200, citing an outlook for strengthening corporate earnings. Elsewhere, Citi strategist Scott Chronert upgraded his target to 5,600 from 5,100. However, this does not mean that the second half of the year is not without risks. Many stock investors are predicting a short-term pullback from the recent rally. Others point to ongoing geopolitical risks and uncertain US election results that could add volatility to stocks. .SPX YTD mountain S & P 500 At the same time, investors are changing how to allocate their portfolios even as stocks continue to rise. Brian Leonard, portfolio manager at Keeley Teton Advisors, recommends that investors look to small- and mid-caps, where he expects there to be “significantly” more upside in a full trade that he says is “overdue “. “There’s a big divide between the performance of larger-cap stocks and smaller-cap stocks,” Leonard said. He expects an increase of 10% or more with small capital. On the other hand, Bank of America’s Sandven said investors should continue to allocate to large-cap technology, where he predicts the AI story will continue to play out. “The speed is getting faster, and the scale of speed and efficiency doesn’t happen without technology,” Sandven said. “So this certainly bodes well for technology-related companies as we look toward the end of the year.” Elsewhere, on the earnings front, a slew of corporates will give investors further insight into inflation and how it is affecting consumer spending. Cruise line operator Carnival reports Tuesday. Package delivery firm FedEx and food company General Mills post results on Tuesday and Wednesday, respectively. The S&P 500 and Dow were headed for a winning week through Friday afternoon, up 0.5% and 1.4%, respectively. The Nasdaq fell 0.1%. Week Ahead Calendar All Times ET Monday, June 24 10:30 a.m. Dallas Fed Index (June) Tuesday, June 25 8:30 a.m. Chicago Fed National Activity Index (May) 9 a.m. FHFA Price Index home (April) 9 a.m. S & P /Case-Shiller comp.20 Home price index (April) 10 a.m. Consumer confidence (June) 10 a.m. Richmond Fed index (June) Earnings: FedEx , Carnival Wednesday, June 26 8:00 AM Final Building Permits (May) 10:00 AM New Home Sales (May) Earnings: Micron Technology , General Mills Thursday, June 27 8:30 AM Standing Orders (May) 8:30 AM GDP final (Q1) 8:30am Initial Claims (06/22) 8:30am Wholesale Inventories (May) 10am Pending Home Sales Index (May) 11am Kansas City Fed Manufacturing Index (June) Earnings: Nike, Walgreens Boots Alliance, McCormick & Co. Friday, June 28 8:30 AM Personal Consumption Expenditure (May) 8:30 AM Personal Income (May) 9:45 AM Chicago PMI (June) 10:00 AM Michigan Final Sentiment (June)
#Wall #Street #set #close #strong #key #inflation #report #deck
Image Source : www.cnbc.com