The decline on Friday came as shares of market darling Nvidia (NASDAQ: ) fell for a second day in a row. The broad market index fell 0.16% to close at 5464.62, while it fell 0.18% to 17689.36. It rose 15.57 points, or 0.04%, to end at 39,150.33.
Shares of Nvidia fell 3.2%, after falling more than 3% on Thursday after hitting an all-time high. Despite that, the chipmaker remains up 155% year-to-date and briefly passed Microsoft (NASDAQ: ) as the most valuable public company at the start of the week.
The S&P 500 hit an intraday high of 5,505.53 earlier this week and posted a weekly gain of 0.6%. The Nasdaq ended the week flat, while the Dow rose 1.45%, marking its best weekly performance since May.
This week, the markets will focus mainly on important economic developments, especially the durable goods report on Thursday, followed by the main 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 believe personal income rose 0.4% and personal spending rose 0.26% in May.
“We estimate that the core PCE price index rose +0.13%, corresponding to a 2.59% year-over-year rate,” Goldman economists said in a note. “Furthermore, we expect the core PCE price index to increase by 0.03% from last month, corresponding to a 2.51% year-over-year rate.”
Investors await Micron’s earnings
The second quarter earnings season is nearing its end, although several important reports have yet to be released to close out the period.
Investors’ attention will be particularly focused on the upcoming printing of Micron Technology (NASDAQ: ), an AI memory chip maker whose shares have risen more than 60% this year amid a continued bull market. Micron will report results on Wednesday after the market closes.
Two other key reports that will be in the spotlight will be those from FedEx (NYSE: ) and Nike (NYSE: ) on Tuesday and Thursday, respectively.
Additionally, companies such as Walgreens Boots Alliance (NASDAQ: ), Levi Strauss (NYSE: ) and McCormick & Company (NYSE: ) will also report this week.
What analysts are saying about US stocks
RBC Capital Markets: “We have added a new stress test to our evaluation analysis. This is an optimistic scenario that drives lower inflation, lower 10-year yields and more Fed tapering than the current consensus.”
“These assumptions imply that a reasonable trailing P/E for the S&P 500 at the end of the year would be about 22.5x and that a fair value for the index would be 5,500. This index level of 5,500 is close to recent highs. While we think of our valuation model as a compass, not a GPS, our work here nonetheless continues to concern us that the US stock market has underperformed in the short term due to over-optimism around interest rates . and inflation after the last CPI/Fed printing meeting.”
Evercore ISI: “Stocks are expensive and will remain so as the S&P 500 is projected to end the year at 6,000. But as the history of past “bull markets” illustrates, some of the strongest gains can occur as soon as stocks become expensive.
“What makes each of the previous ‘bull markets’ unique is their trajectory with respect to timing, price, earnings and breadth. Common to all, valuation alone is not enough to sell. The “expensive” market of 2024 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 earnings, the prospect of a return on earnings growth in 2024, and relatively strong breadth, despite Mag 7 doing most of the lifting.”
Morgan Stanley: “With macro data broadly coming in softer YTD, many lower quality and economically sensitive areas of the market have lagged, while a narrow slate of higher quality mega caps have delivered. In our view, this is a sign that the market is focusing more on softening growth and less on inflation and rates. A good example of this phenomenon is the underperformance of small caps despite falling rates. This background syncs with our long-held view that the current policy mix of heavy fiscal charges and higher advance rates is effectively alienating many economic participants.”
BTIG: “Last week saw some of the biggest inflows on record in large-cap tech/growth funds. This feels like a chalk mark after the run we’ve had. We remain concerned about a short-term softening of many YTD drivers. With that said, even within the ‘Mag 7’ we are seeing dispersion and charts like AMZN and GOOGL are still constructive and not too stretched. If the SPX is to avoid a bigger pullback in July, bulls should see continued rotation below the surface.
UBS: “As we’ve said over the past several months, we believe the market backdrop remains favorable due to: 1) strong and extended earnings growth, 2) disinflation, 3) a Fed moving toward rate cuts and 4) increased investment in AI infrastructure and applications. These trends have pushed the S&P 500 to a string of all-time highs.”
“As a result of healthy economic growth and increased investment in AI, we look for S&P 500 EPS to grow 11% in 2024 (to $250) and 6% in 2025 (to $265), which could turn out 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.