Wall Street’s enthusiasm faded in the final stretch of a solid quarter for stocks that saw the market hitting multiple all-time highs. Equities traders across multiple sectors are rearranging their positions in the aftermath of the debate between President Joe Biden and former President Donald Trump. Biden’s shaky performance boosted sentiment around Trump’s odds for securing a second term in the White House. The result: shares of private prisons, credit-cards companies, and health insurance firms — the groups that would potentially win from another Trump presidency — are trading higher, while renewable energy and cannabis stocks are in the red.
JPMorgan Chase & Co.’s Marko Kolanovic says the S&P 500 will falter in the coming months in the face of mounting headwinds, from a slowing economy to downward earnings revisions. The gauge is poised to plunge to 4,200 by year-end, a roughly 23% drop from Thursday’s close, he said.
“There is a clear disconnect in the huge run-up in US equity valuations and the business cycle,” the strategist wrote, adding that the S&P 500’s 15% year-to-date gain isn’t justified, given waning growth projections.
After gaining almost 1% earlier Friday, the S&P 500 fell. Treasury yields pushed higher, reversing a drop in the immediate aftermath of inflation data that bolstered bets on Federal Reserve rate cuts. Traders kept a close eye on news regarding the US presidential race, while remaining cautious ahead of Sunday’s elections in France.
Stocks are heading into the second half having gained about 15% this year. Historically, a strong first half tends to be followed by above-average second-half returns, according to Adam Turnquist at LPL Financial.
“The S&P 500 has followed up a positive first-half return with an average second-half gain of 6%,” Turnquist added. Furthermore, when first-half gains were 10% or higher, the index posted average gains of 7.7% in the second half, with 83% of occurrences producing positive results.
The US presidential election and its aftermath promise investors big market swings in the second half of the year, says Goldman Sachs Group Inc.’s Scott Rubner.
The global markets division managing director and tactical specialist has been correctly bullish on US stocks in May and June, but after July 17, he is modeling a correction in the stock market — this usually means about a 10% drop for equities.
“Uber Technologies Inc. and Lyft Inc. agreed to a series of worker benefits to resolve a longstanding state lawsuit in Massachusetts that challenged drivers’ employment status as independent contractors, putting a stop to the companies’ bid to take the issue before voters in November.
Rite Aid Corp. has been cleared to exit bankruptcy after winning court approval on a restructuring plan that’s poised to save the ailing pharmacy chain from liquidation by handing control of the business to key creditors.
Microsoft Corp.’s $13 billion investment into OpenAI Inc. is set to come under added scrutiny from European Union’s antitrust watchdogs, who are poised to quiz rivals about the AI firm’s exclusive use of Microsoft’s cloud technology.
Nokia Oyj has agreed to buy Infinera Corp. in a $2.3 billion deal that will expand the company’s networking products for data centers and increase its presence in the US, a potentially key source of growth as the boom in artificial intelligence drives demand for server capacity.
Overall, the market is experiencing fluctuations and uncertainties as investors navigate through the aftermath of the presidential debate and anticipate potential policy changes in the coming months. Stay tuned for more updates on the market trends and corporate developments.
