The return from a long holiday weekend is set to be a frosty one for investors, and not just that dangerous cold. Stock futures are dropping as bond yield rise, echoing Monday’s action in Europe after some hawkish regional policymaker talk.
Meanwhile, former President Donald Trump’s Iowa triumph, while expected, has sparked some chatter about a volatile election year ahead. (See chart below)
But we’re tuning into the optimists for Tuesday, with a call of the day from a Wall Street bank that has leapfrogged its year-end stock outlook.
A team of strategists at UBS led by Jonathan Golub now expect the S&P 500
SPX
to finish the year at 5,150 from a prior 4,850. Their outlook from last year had warned that odds were in favor of a better turnout for stocks, with robust earnings, easing inflation and monetary policy and an improved economic backdrop all likely.
“Given the Fed’s recent pivot, subsequent decline in rate expectations, and above-trend 2024 [earnings per share] revisions, we now embrace this upside scenario as our base case,” says Golub and the team. It’s now higher than UBS’s wealth management arm, which recently upped their index target to 5,000.
Bullishness from the UBS strategy team comes as stocks have gotten off to a rocky start, as some worry investors, armed with overly optimistic Fed rate-hike expectations, piled too quickly into stocks. Still, the S&P 500 sat just 0.27% from a Jan. 2022 record close on Friday.
The bank’s new S&P 500 target represents 7.7% upside from here, as they also boosted their 2024-25 earnings per share estimate to $225 from $235 and $246 to $250, respectively.
“Importantly, our growth estimates of 6.3% and 6.4% over the next 2 years are below the consensus of 11.4% and 12.8%. While earnings should drive
2024 returns, falling interest rates should support incrementally higher multiples,” said Golub and co.
The Swiss-headquartered bank’s new S&P 500 target puts it toward the top of Wall Street’s 2024 forecasts. Yardeni Research heads that with a 5,400 target, while JPMorgan brings up the rear with 4,200. In late December, Goldman Sachs lifted its own forecast to 5,100 from 4,700, not long after setting it.
The markets
Stock futures
ES00,
YM00,
NQ00,
are in the red, with Treasury yields
BX:TMUBMUSD10Y
BX:TMUBMUSD02Y
climbing. The dollar
DXY
is pushing ahead, with gold
GC00,
lower and crude
CL.1,
BRN00,
modestly higher. Natural-gas futures
NGG24,
are down 8%.
| Key asset performance | Last | 5d | 1m | YTD | 1y |
| S&P 500 | 4,783.83 | 0.43% | 0.91% | 0.29% | 19.62% |
| Nasdaq Composite | 14,972.76 | 3.09% | 1.07% | -0.26% | 35.14% |
| 10 year Treasury | 3.99 | -2.54 | 5.76 | 10.89 | 44.04 |
| Gold | 2,052.20 | 0.89% | 0.54% | -0.95% | 6.72% |
| Oil | 72.23 | 1.85% | -0.91% | 1.26% | -9.78% |
| Data: MarketWatch. Treasury yields change expressed in basis points | |||||
The buzz
Goldman Sachs
GS,
and Morgan Stanley
MS,
earnings are on tap ahead of the open. A trio of big banks including JPMorgan
JPM,
finished weaker on Friday after kicking off earnings season. The rest of the week will see more financial companies report, alongside Caterpillar
CAT,
The Empire State manufacturing survey hits at 8:30 a.m., with retail sales on Wednesday. Fed Gov. Christopher Waller is due to speak at 11 a.m. — a speech he gave last November tipped off the central bank’s dovish turn.
Tesla
TSLA,
CEO Elon Musk said he doesn’t want to grow the EV maker’s AI and robotics arms without controlling more of the company. Shares are down 2% in premarket.
A deadly and dangerous Arctic cold front continues to sweep the U.S., shuttering schools and flights and straining communities.
Donald Trump won Iowa’s Republican presidential caucuses, while Florida Gov. Ron DeSantis came in second place.
The World Economic Forum in Davos kicks off in earnest on Tuesday, with climate change and artificial intelligence on the global priority list.
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The chart
Evercore ISI’s Julian Emanuel has this warning: “The setup for politically inspired stock market volatility over the next weeks both in the U.S. and abroad is underpriced by investors.”
Focusing on the U.S., where the New Hampshire Republican presidential primary is now just around the corner, he offers up this chart:
“The history of U.S. election years where Congressional Control has been as politically “tight” (House 10 or fewer seats, Senate 2 or fewer seats) as in 2024 is unequivocally volatile for stocks – 5 of 8 years down, 2/3 up years with recessions,” says Emanuel.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.
| Ticker | Security name |
|
TSLA, |
Tesla |
|
NVDA, |
Nvidia |
|
NIO, |
Nio |
|
AAPL, |
Apple |
|
AMC, |
AMC Entertainment |
|
GME, |
GameStop |
|
MARA, |
Marathon Digital |
|
MSFT, |
Microsoft |
|
AMZN, |
Amazon.com |
|
AMD, |
Advanced Micro Devices |
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