Analysis: This signal could be good news for the stock market | CNN Business (2024)

Analysis: This signal could be good news for the stock market | CNN Business (1)

There’s an interesting dynamic at play as investors worry about corporate profits.

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Earnings season is winding down, and a strange confluence of events is occurring — the economy is softening, but corporate profits are accelerating.

Some analysts think that means good news for stocks in the second half of the year.

What’s happening: Last week proved that investors are on edge and scrambling for clues about what comes next — even relatively insignificant economic indicators are capturing outsized attention on Wall Street.

The Dow plunged by more than 600 points, notching its worst day of the year so far, on Thursday after the Purchasing Managers Index for May, expected to fall slightly, came in 3.5 percentage points higher month-over-month. That, in turn, suggested to investors that the Federal Reserve won’t be cutting interest rates anytime soon, sparking the selloff.

PMIs provide early insights into the economic health of the manufacturing and services sectors by surveying purchasing managers on their business conditions. It’s a useful tool, but doesn’t typically get a lot of attention on Wall Street.

Other data, like Institute for Supply Management reports, are generally considered more comprehensive and influential.

Last weeks wild reaction to the PMI highlights the market’s current sensitivity to economic data as investors fret over Fed interest rate decisions. Even secondary economic indicators are shaping market sentiment and influencing investment decisions as Wall Street worries that a more robust economic environment can mean higher-for-longer interest rates.

Yes, but: There’s an interesting dynamic at play as investors worry about corporate profits and a stronger economy at the same time, wrote Bank of America analysts in a note on Tuesday.

Higher interest rates can increase borrowing costs and reduce corporate profits, leading to a sell-off in equities as investors adjust their expectations for future growth and profitability — that’s where the worry comes from. But that hasn’t really happened. At least not yet.

About 97% of S&P 500 companies have reported their first quarter earnings at this point. And so far, they’ve beat consensus earnings-per-share estimates by about 3%, according to Bank of America. Earnings are up by 7% since this time last year, and all 11 S&P 500 sectors, with the exception of healthcare, beat estimates.

There were some concerns about companies lowering their outlook for the rest of the year, but, overall, estimates for the remainder of 2024 have slightly risen this quarter.

“The equity cycle feels different than the macro cycle today. While [gross domestic product] and the labor market seem to be slowing, earnings are accelerating,” wrote the Bank of America analysts.

Historically, a slowing economy and accelerating earnings backdrop has been the best environment for stocks, they wrote. This could point to a strong second half of the year for markets.

Yes, but, but: That also means that there could be a lot of sensitivity and extreme market swings when economic data comes in stronger than expected, which we saw last week.

Still, the Fed is only part of the equation. Goods and manufacturing represent about half of earnings for the S&P 500, the BofA analysts wrote. But they make up less than 20% of the US economy.

That means an improving manufacturing cycle but slowing services can lead to a divergence between market performance and economic performance.

Coming up next: All eyes, meanwhile, are on the release of the US Personal Consumption Expenditures index for April on Friday — that’s the Fed’s preferred inflation gauge. There are also some notable earnings reports coming in this week — including Salesforce, Dell and Marvell. In consumer sectors, the list includes Dollar General and Costco.

US home prices hit another record high in March

US home prices reached a record high in March, reflecting the housing market’s persistent affordability crisis.

The S&P CoreLogic Case-Shiller US National Home Price Index, a measure of home prices across the country, jumped 6.5% in March from a year earlier to a record high. It is the sixth time the index has reached a new record high over the past year.

The report showed that there’s strong demand for housing in urban population centers such as San Diego, New York, Cleveland and Los Angeles. The 20-city index rose in March at a slightly faster pace than in February.

“This month’s report boasts another all-time high,” said Brian Luke, head of commodities, real and digital assets, at S&P Dow Jones Indices. “We’ve witnessed records repeatedly break in both stock and housing markets over the past year.”

In addition to unrelentingly high home prices, the housing market is also grappling with a chronic lack of homes on the market and elevated mortgage rates. Put together, it has resulted in a tough housing market, especially first-time buyers.

Read more here.

Here’s how new AI tech could change the iPhone

Imagine asking Apple’sSiri to showyouan old photo taken from a child’s second birthday, or summarizing lengthy emails and writing drafts. Then consider Siri learning your schedule, preferences, even your personality, so it can better communicate with you throughout the day.

Generative AI, artificial intelligence that can provide thoughtful and thorough responses to questions and prompts, could potentially breathe new life into Apple’s iPhone lineup at a time when competitors are threatening to leave the company behind in the race to shape what could be a world-changing technology, reports my colleague Samantha Murphy Kelly.

The company is widelyexpectedto partner with ChatGPT maker OpenAI ahead of its annual Worldwide Developers Conference in June, where it will likely show off its first batch of AI tools coming to the iOS software.

Although artificial intelligence has powered some of the iPhone’s experiences for years, such asLive Textand improved autocorrect, generative AI could unlock new levels of interaction and personalization. All this during a time when the company is under pressure to catch up to rivals such as Google and Samsung,which are already using the technology in its smartphones.

“We see generative AI as a key opportunity across our products and believe we have advantages that set us apart there,”Apple CEO Tim Cook saidon the company’s most recent earnings call in early May, noting there would be news announced in the “weeks ahead.”

Read more here.

Analysis: This signal could be good news for the stock market | CNN Business (2024)

FAQs

How do you Analyse stock market news? ›

There are three main types of share market trends: short-term, intermediate-term and long-term. You can also classify trends as uptrend, downtrend or sideways trend. Some information about markets and trends will give you insight into how markets work.

What are the stock market signals? ›

Fundamental stock signals come from things like news reports, earnings releases, economic data releases and more. They provide insight into how a company is performing and its likely future direction.

What is the best source of news for the US stock market? ›

Stock Markets, Business News, Financials, Earnings - CNBC.

What is the signal to buy stocks? ›

Some of the most common buy signals include: Chart Patterns: Many chart patterns generate a buy signal when the price moves beyond a certain level. For example, an ascending triangle pattern generates a buy signal when the price breaks out from the upper trend line resistance.

How to do stock market analysis? ›

There are a few aspects to consider when you wish to determine whether a share is worth investing in. The company's fundamentals: Research the company's performance in the last five years, including figures like earnings per share, price to book ratio, price to earnings ratio, dividend, return on equity, etc.

What is an example of a stock analysis? ›

What is an example of stock analysis? A very, very basic example of stock analysis would include looking at a stock's share price, comparing it to its historical averages and moving averages, overall market conditions, and looking at the company's financial statements to try and gauge where it might move next.

What is the best signal to use for trading? ›

Best trading indicators
  • Stochastic oscillator.
  • Moving average convergence divergence (MACD)
  • Bollinger bands.
  • Relative strength index (RSI)
  • Fibonacci retracement.
  • Ichimoku cloud.
  • Standard deviation.
  • Average directional index.

What is signaling in the stock market? ›

A signaling approach structures investing or trading based on data-driven signals. A signally-driven trade is based on data such as price information or metadata such as insider trading activity. Signaling is used in technical analysis as well as built into algorithmic trading systems.

What is a market signal? ›

Market signals notify market participants when to buy or sell a specific asset while also informing them of other possible options. This results in abnormal growth and short-term interests.

Which site is best for stock analysis? ›

Here is a list of the best sites for stock market analysis:
  • Morningstar, Inc. ...
  • Seeking Alpha. ...
  • Zacks Investment Research, Inc. ...
  • Bloomberg. ...
  • WallStreetZen. ...
  • The Motley Fool. ...
  • TradingView. ...
  • Finviz.
Mar 28, 2024

How do traders get news so fast? ›

Newswires are a direct source of financial news and press releases. Most trading platforms have news feeds connected to some of the most popular newswires.

What news affects the stock market the most? ›

Positive news will normally cause individuals to buy stocks. Good earnings reports, an announcement of a new product, a corporate acquisition, and positive economic indicators all translate into buying pressure and an increase in stock prices.

How do I find the best trading signal? ›

Traders can find trading signals on various online platforms, financial news websites, and through subscription services such as this trading signal service . Forex brokers provide access to trading signals by supporting third-party signal platforms such as AutoChartist and Trading Central.

What are stock signals? ›

Stock trading signals are popular with investors who don't have the time or experience to make investment decisions. In simple terms, signals tell you exactly what stocks to buy and sell. Otherwise called stock trading tips, picks, or recommendations, signals offer a more passive way to invest in the markets.

What is a strong buy signal? ›

Key Takeaways

A strong buy is an analyst's recommendation to purchase shares of a company that, based on analysis, is expected to dramatically outperform in the short- to mid-term.

How do you Analyse trading news? ›

The most common way to trade news is to look for a period of consolidation or uncertainty ahead of a big number and to trade the breakout on the back of the news. This can be done on both a short-term basis (intraday) or over several days.

How do you analyze financial news? ›

Response
  1. Financial Details: We need to know the extent of the stock decline, the specific revenue miss, and the earnings beat. ...
  2. Industry Context: Understanding the broader industry trends and competitive landscape is crucial. ...
  3. Long-Term Performance: One day's trading doesn't tell the whole story.

How do you analyze news? ›

To analyze news topics, you need to apply critical thinking and analysis skills to your information. You need to question the assumptions, claims, and evidence of your sources and your own perspective. You need to look for strengths, weaknesses, limitations, and implications of your information.

How do you analyze the current market? ›

How to conduct a market analysis: 7 steps
  1. Determine the purpose of your study. There are many reasons why businesses might conduct market research. ...
  2. Look at your industry's outlook. ...
  3. Pinpoint target customers. ...
  4. Compare your competition. ...
  5. Gather additional data. ...
  6. Analyze your findings. ...
  7. Put your analysis into action.
Jul 5, 2024

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