The S&P 500 dipped on Friday as shares of market darling Nvidia (NASDAQ:NVDA) fell for the second consecutive day. The broad market index declined by 0.16%, closing at 5,464.62, while the Nasdaq Composite dropped 0.18% to 17,689.36. The Dow Jones Industrial Average inched up 15.57 points, or 0.04%, to end at 39,150.33.
Nvidia shares fell 3.2%, following a drop of over 3% on Thursday after hitting an all-time high. Despite this, the chipmaker remains up 155% year-to-date and briefly surpassed Microsoft (NASDAQ:MSFT) as the most valuable public company earlier in the week.
The S&P 500 reached an intraday record of 5,505.53 earlier this week and posted a 0.6% weekly gain. The Nasdaq ended the week flat, while the Dow saw a 1.45% increase, marking its best weekly performance since May.
This week, the markets will largely be focused on important economic developments, most notably the durable goods report on Thursday, followed by the core PCE and University of Michigan reports on Friday. In addition, several Fed officials are scheduled to speak, including Governor Waller on Monday and New York Fed President Williams on Sunday.
For PCE data, economists at Goldman Sachs (NYSE:GS) believe that personal income increased by 0.4% and personal spending grew by 0.26% in May.
“We estimate that the core PCE price index rose +0.13%, corresponding to a year-over-year rate of 2.59%,” Goldman economists said in a note. “ Additionally, we expect that the headline PCE price index increased by 0.03% from the prior month, corresponding to a year-over-year rate of 2.51%.”
Investors await Micron’s earnings
The Q2 earnings season is nearing its end, though several significant reports are still yet to be released to close out the period.
Investors’ attention will particularly be focused on the upcoming Micron Technology (NASDAQ:MU) print, an AI memory chipmaker whose shares surged more than 60% this year amid the ongoing bull market. Micron will report the results on Wednesday following the market’s close.
Two other major reports that will be in the spotlight will be those by FedEx (NYSE:FDX) and Nike (NYSE:NKE) on Tuesday and Thursday, respectively.
In addition, companies like Walgreens Boots Alliance (NASDAQ:WBA), Levi Strauss (NYSE:LEVI), and McCormick & Company (NYSE:MKC) will also report this week.
What analysts are saying about US stocks
RBC Capital Markets: “We’ve added a new stress test to our valuation analysis. This is an optimistic scenario which bakes in lower inflation, lower 10-year yields, and more Fed cuts than the current consensus.”
“These assumptions imply that a reasonable trailing P/E for the S&P 500 at year-end would be around 22.5x and that a fair value for the index would be 5,500. That 5,500 index level is close to recent highs. While we consider our valuation model to be a compass, not a GPS, our work here nevertheless continues to make us worry that the US equity market has gotten a little ahead of itself in the short term due to a little too much optimism around interest rates and inflation after the latest CPI print/Fed meeting.”
Evercore ISI: “Stocks are expensive and will remain so as S&P 500 is forecast to end the year at 6,000. But as the history of past “expensive markets” illustrates, some of the strongest gains can occur once stocks become expensive.
“What makes each of the prior “expensive markets” unique is their own trajectory with regard to time, price, earnings and breadth. Common to all, valuation alone is not sufficient to sell. 2024’s “expensive” market is driven by the promise of the AI Revolution, a Fed willing to cut interest rates for the “right” reasons, a period still relatively small in terms of duration and gains, the prospect of a return to earnings growth in 2024, and relatively robust breadth despite Mag 7 doing much of the lifting.”
Morgan Stanley (NYSE:MS): “With macro data broadly coming in softer YTD, many lower quality and economically sensitive areas of the market have lagged, while a narrow list of higher quality mega caps have carried performance. In our view, this is a sign the market is becoming more focused on growth softening and less focused on inflation and rates. The underperformance of small caps despite falling rates is a good example of this phenomenon. This backdrop syncs with our long-standing view that the current policy mix of heavy fiscal and higher front end rates is effectively crowding out many economic participants.”
BTIG: “Last week saw some of the biggest inflows on record into large-cap tech/growth funds. That feels like a sign of froth after the run we have had. We remain concerned about a near-term unwind of many YTD leaders. With that said, even within the 'Mag 7' we are seeing dispersion and charts like AMZN and GOOGL are still constructive and not overly stretched. If the SPX is going to avoid a bigger pullback into July, bulls need to see continued rotation below the surface.”
UBS: “As we have said over the past several months, we believe the market backdrop remains favorable due to: 1) solid and broadening profit growth, 2) disinflation, 3) a Fed pivoting to rate cuts, and 4) surging investment in AI infrastructure and applications. These trends have propelled the S&P 500 to a string of all-time highs.”
“As a result of the healthy economic growth and surging investment in AI, we look for S&P 500 EPS to rise 11% in 2024 (to USD 250) and 6% in 2025 (to USD 265), which could prove to be conservative. Overall, we believe the environment remains supportive for US equities and investors should have a full allocation to the asset class. Our S&P 500 targets are 5,500 for year-end and 5,600 for June 2025.”