(May 11): US equities struggled for direction Monday as strong earnings reports spurred bullish Wall Street strategists to raise their targets on the S&P 500 this year despite lingering concerns about the duration of the Iran war.
The S&P 500 opened little changed on Monday. Strength in chip stocks continued to buoy the US benchmark with Intel Corp and Micron Technology Inc were among the top performers. The tech-heavy Nasdaq 100 edged 0.2%, while the Dow Jones Industrial Average slipped 0.1%.
“Markets still believe a cease fire agreement will be reached,” said Tom Essaye, founder of the Sevens Report, on why stocks aren’t selling off more sharply after US President Donald Trump called Iran’s response to his proposal to end the war “totally unacceptable.”
Crude prices climbed Monday, with West Texas Intermediate oil once again approaching US$100 a barrel. The Cboe Volatility Index edged higher to 18.
“The geopolitical front remains extremely uncertain, but investors continue to be able to look past these issues,” said Matt Maley, chief market strategist at Miller Tabak + Co.
Even as the conflict has dragged on, the strength of first-quarter earnings surprises has now led multiple Wall Street strategists to raise their full-year targets on the S&P 500. CFRA upped their target to 7,730 points from 7,400 on resilient consumer spending and AI-related investment. Yardeni Research Inc now has the highest estimate on Wall Street among strategists tracked by Bloomberg. The firm expects the US benchmark to end the year at 8,250, up from 7,700 points.
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“We’ve never seen consensus earnings expectations rise so quickly for the current and coming years as they have in recent months. The result has been an earnings-led meltup in the stock market,” Ed Yardeni, president and chief investment strategist at Yardeni Research, wrote in a note Sunday.
The recent gains in AI stocks and semiconductors resembles the melt-up phase from 1999, Vital Knowledge founder Adam Crisafulli wrote in a note to clients. South Korea’s main stocks index jumped 4% Monday.
Others see dangers in the market’s sharp climb in recent weeks. Michael Burry said the market had “jumped the shark” in an early morning web post.
See also: US stocks retreat on hotter-than-forecast core CPI, jump in oil
Strategists are also concerned that elevated oil prices and fears about potential shortages could derail the rally.
Morgan Stanley warned Monday that the oil market is in a “race against time” and that prices could move sharply higher if the Strait of Hormuz remains closed into June.
“The biggest concern is we’ve had a buffer on energy prices and there’s arguments about when that stops out. When do we hit the bottom of the tanker and when does this really become an issue,” Sarah Hunt, chief market strategist at Alpine Saxon Woods, said in an interview with Bloomberg Television.
Still ahead Monday, traders will get a look at existing home sales data for the month of April. Key data this week include an inflation report Tuesday, producer prices on Wednesday and both import prices and retail sales on Thursday.
Traders are also waiting for a meeting between Trump and Chinese President Xi Jinping expected later this week in Beijing.
Uploaded by Magessan Varatharaja
