- On April 25, 2019
- economics, in the news, investment, Investments, investors, market, market update, NASDAQ, S&P, Stock Market, stocks, Wall Street
Cornerstone’s Week on Wall Street
Stock markets were largely flat in a shortened trading week last week. The S&P 500 closed a hair lower on the week, while the Dow Jones Industrial Average and NASDAQ squeaked out minuscule gains. While markets were flat at the index level, below the surface there was much more volatility. Healthcare (-4.6%) and Real Estate (-3.2%) sold off sharply, while Industrials (1.3%) and Information Technology (1.3%) stocks rallied. Small-Cap stocks were also down (-1.2%) and are not participating in the rally to the same degree as Large-Cap stocks. Small-cap stocks led the way in the rally and sell-off in 2018, but have not participated to the same degree in this year’s rally. This divergence bears watching, as the broader indexes will need Small-cap stocks to catch up if the rally is going to continue from here.
With the S&P 500 Index trading around the 2900 level, and at 22x trailing P/E ratio we think stocks are fully valued. In our view, current prices already reflect much of the good news of the shift in Fed policy and improving prospects on a trade deal. It is possible that we may get a quick boost higher once a trade deal is announced, but in order to see sustained upside from here would require a further expansion of P/E multiples or strong corporate earnings growth. Neither of these seems likely to happen in the near-term. While earnings forecasts have trended lower for the past several months, a slew of earnings results this week will provide an update on the health of the broader economy.
Earnings season kicks into high gear this week in what is the busiest week of the Q1 reporting season. Nearly every sector will have a number of high-profile releases including: Coca-Cola (KO), Lockheed Martin (LMT), Verizon (VZ), Microsoft (MSFT), Facebook (FB), Amazon (AMZN), Exxon Mobil (XOM), Visa (V), Tesla (TSLA), and Starbucks (SBUX) among many others. On the economic docket, investors will get the initial reading on Q1 GDP on Friday, along with Consumer Sentiment, Durable Good Orders, and Existing Home Sales.
Economic, return data, and fund flows from Bloomberg (return data includes dividends).
The S&P 500 includes 500 leading companies in leading industries of the U.S. economy. It is a core component of the U.S. indices that could be used as building blocks for portfolio construction. It is also the U.S. component of S&P Global 1200.
The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.
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