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Carrying the team.
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A strong start to the week for stocks shows no signs of backing down, as we count down to the Federal Reserve meeting outcome on Wednesday.
China may be helping out for Tuesday, after reporting the first rise in retail sales — 0.5% — of 2020. Investors have been watching the nation that emerged first from the coronavirus pandemic, to see how other countries might eventually climb out.
Pandemic worries, election uncertainty, U.S.-China tensions — none of that is enough to sway this tough bull market, says LPL Financial’s chief market strategist Ryan Detrick, in our call of the day.
Detrick tells clients that markets are probably pricing in a too-optimistic near-term economic recovery scenario, and “work is still needed for stocks to grow into their current valuations.” But he has upped his own S&P 500 SPX, +1.27% target to 3,450-3,500, citing five reasons why the path of least resistance is higher.
- COVID-19 is getting under control, with U.S. daily case and hospitalizations down from the spring peak. We can hope a vaccine will arrive by year-end, but we also “have a better playbook of how to contain the virus’ spread and treat patients than we did in the spring.” Detrick says.
- Economic data continues to improve, with third-quarter GDP possibly reaching a record 30%, and retail sales past their pre-pandemic peak. More stimulus from Congress may still come before the election, he says.
- “Momentum breeds momentum.” When the S&P 500 has risen five-straight months such as April through August, stocks have historically moved higher. The last 26 times the index saw a similar string of gains, it was higher a year later — 5 times, he notes.
- Earnings estimates are picking up. “Though not always predictive, estimate increases have tended to come in bunches, so we think the odds are good that estimates may continue to rise and third-quarter earnings from corporate America may surprise to the upside,” says Detrick.
- The winners will “continue to carry” this stock market. “The so-called ‘work-from-home’ stocks have powerful secular tailwinds that have only strengthened during the pandemic. We estimate more than half of the S&P 500 is either unaffected by the pandemic or benefiting from it, with about 40% of the index in technology, digital, media and e-commerce,” said Detrick. And even though the recession has hit the economy hard, consumer staples, health-care and tech stocks are all poised to see earnings gains this year, he said.
The markets
U.S. stock futures YM00, +0.66% ES00, +0.72% are higher, with those for the Nasdaq-100 NQ00, +1.04% out in front, and European stocks SXXP, +0.80% on the rise as well. Oil prices are rising, along with gold.
Keep an eye on the Russell 2000 RUT, +2.65%, which rebounded from a two-session rout on Monday.
The buzz
The Federal Reserve’s two-day meeting kicks off on Tuesday (see this preview). Data on tap include a New York survey of manufacturing, import prices and industrial production.
U.S. holiday sales may depend on whether the rich spend a lot and low-income families spend at all, says a survey from consulting firm Deloitte.
After pausing during the coronavirus pandemic, Citigroup C, -5.58% is reportedly resuming job cuts.
Apple’s AAPL, +2.99% “Time flies” September event is ahead, but don’t get your hopes up over a new 5G iPhone.
AstraZeneca’s AZN, +2.75% COVID-19 vaccine trials have restarted in the U.K., but not in the U.S. And scientists in Pittsburgh have discovered a tiny biological molecule that completely neutralizes the virus that causes COVID-19.
Hurricane Sally has morphed into a dangerous Category 2 storm, as it closes in on the Gulf Coast.
Shifting winds and hot, dry weather have sparked new fires along already devastated parts of the West Coast, with fresh evacuations as far as Idaho. But President Donald Trump rejected climate change as a reason for those fires. Meanwhile, Facebook FB, -0.17% is launching the Climate Science Information Centre to help battle disinformation.
Random reads
Actor Paul Rudd has a face mask message for millennials.
Out of a coma, Russia’s opposition leader sends a message to his family via a cheerful Instagram post.
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