The US Stock Market is ‘Melting Up’
$DIA, $SPY, $QQQ
US stocks rose for a 5th day running, with technology shares bolstering major indexes, as the market’s investors continue to price in the impact of tax cuts before corporate earnings season begins later this week.
- The S&P 500 Index rose 0.2% to a record 2,747.43 as of 4 p.m. in New York. It rose 2.6% last week.
- The NAS Comp rose 0.3% to an all-time high, while the DJIA lagged, slipping 14 points from its record to halt its 4-day rally.
The S&P 500 Index’s best week in 13 months propelled it 1/2% of surpassing roughly a 25% of strategists’ price targets for Y 2018.
“It’s only been 5 days but it feels like 40,” head of equity strategy at Wells Fargo & Co. “Overall, it suddenly feels like the consensus is in the reflation trade and almost daily there are more and more converts to the belief in a melt-up.”
Last week’s gainer of 2.8% took the benchmark for American equities to a record 2,743, just shy of the 2,750 mark that where Morgan Stanley’s Mike Wilson, Scotiabank’s Vincent Delisle, and Stifel Nicolaus’s Barry Bannister saw the S&P 500 Index finishing the year.
It outstripped the 2,650 price target of HSBC’s Ben Laidler before the year even began.
Market analysts had been scrambling to bump up their Y 2018 price targets, with both Harvey and Jonathan Golub of Credit Suisse Group AG proffering a more Bullish outlook for US equities in the last 10 days of Y 2017.
But just like Y 2017, when the S&P 500 Index ended more than 175 points above the most optimistic price target heading into the year, the market melt-up may steamroll even the sunniest of views.
High investor sentiment has pushed the S&P 500 Index, as well as most global equity gauges, to overbought levels, but the market’s enthusiasm is grounded in firming fundamentals.
- The MSCI All-Country World Index added 0.1% for a 5th straight gainer.
- The MSCI Emerging Market Index gained 0.4% to the highest in nearly years.
The 3 month earnings estimate revision ratio for the US stocks constituents brightened to a 6-year high in December thanks to the passage of the Trump tax overhaul and a rally in Crude Oil prices.
The top-line trends are even more encouraging, as even more analysts have ratcheted up their sales forecasts.
The magnitude of the positive revisions to earnings by companies on the S&P 500 understates the positive impact the Trump tax cuts will have on corporate America, says the Credit Suisse analyist.
“Analysts have adjusted their 2018 forecasts by less than 2 percent for recent tax changes, a fraction of the likely impact,” he wrote in a note to clients Monday.
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Very Bullish (0.69)||Very Bullish (0.67)||Very Bullish (0.73)||Very Bullish (0.67)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Very Bullish (0.69)||Very Bullish (0.71)||Very Bullish (0.77)||Very Bullish (0.58)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Bullish (0.42)||Bullish (0.40)||Very Bullish (0.54)||Bullish (0.33)|