A previous version of this report incorrectly described a planned oil production cut. The article has been corrected.<\/p>\n
Hunting for optimists the Monday after an explosive jobs and debt-ceiling fueled relief rally that sent the S&P 500 \u201cThis is an unloved rally for sure \u2013 SPX above 4,200 and out of the [4,000-4,200] range just as the VIX What Friday did show us is that Big Tech\u2019s rally can spread itself around when it wants to, so more days like that and some Wall Street sourpusses may change their tune. For now, though it seems those who didn\u2019t sell in May are being told to prune in June.<\/p>\n Read: <\/strong>A Fed skip? A pause? Even so, investors aren\u2019t likely out of the woods.<\/p>\n That brings us to our call of the day<\/strong>, and let the tomatoes fly, as our favorite bear is back \u2014 Morgan Stanley\u2019s \u201cWorried\u201d Mike Wilson, who still expects \u201ca meaningful earnings recession this year (-16% year-over-year decline) that has yet to be priced in,\u201d by stock markets. <\/p>\n While his S&P 500 base case remains unchanged at 3,900, the lower end of Street forecasts, the strategist says investors are stuck in the middle of several \u2018hotter but shorter\u2019 earnings cycles in the context of a broader secular bull market \u2014 boom, bust, boom, the strategist said in a Sunday note.<\/p>\n Wilson says the bank\u2019s expectations for a bigger stock drop have been kept at bay by the outperformance of AI players and some big tech names, Fed pivot fever and hopes we\u2019ve been through the worst of an earnings recession. But, a major repricing has hit lower quality, cyclical and small-cap stocks, he adds.<\/p>\n The strategist offers some guidance on when the market will finally start pricing in that earnings rout, focusing on the equity risk premium (ERP) portion of the price\/earnings (PE) ratio. <\/p>\n The ERP is defined as the difference between the expected earnings yield and the yield on safe Treasurys, with a higher number meaning investors are being compensated more for putting money in stocks.<\/p>\n He said more than 100% of the reset on PE last year was due to higher 10-year Treasury yields. \u201cHistorically, that \u2018moment of recognition\u2019 for the market typically occurs when the forward NTM [next 12 months] EPS forecast for the S&P 500 goes negative on a y\/y [year over year] basis.\u201d The expected liquidity drain from the debt ceiling passage may help push this process along, he said.<\/p>\n So if an investor is buying what Wilson is selling they will take his advice to stick to defensive characteristics, operational efficiency and earnings stability.<\/p>\n But to avoid leaving things on a totally crummy note, Wilson does add a light at the end of the tunnel. Morgan Stanley expect a 23% bounce in EPS growth in 2024 and 10% in 2025, as Fed policy turns more accommodative in 2024 (not 2023). Here are more drivers of the next recovery\/bull market post correction:<\/p>\n Stocks SPX, COMP, Oil prices BRN00, For more market updates plus actionable trade ideas for stocks, options and crypto,\u00a0subscribe to\u00a0MarketDiem by Investor\u2019s Business Daily.<\/strong>\u00a0Follow all the stock market action with\u00a0MarketWatch\u2019s Live Blog.<\/p>\n Data showed U.S. factory orders rose for the fourth gain in the past five months, while the Institute for Supply Management services gauge grew at a slower pace in May, with demand leveling off. And it\u2019s a blackout period for the Fed as its June 13-14 Fed meeting looms. <\/p>\n Circor stock Analyst says Apple U.S. regulators are planning fresh rules that will force bigger banks to lift their capital requirements by an average 20%, The Wall Street Journal reported.<\/p>\n UBS said its acquisition of rival Credit Suisse Group should be completed as early as June 12, at which point the latter\u2019s shares will be delisted and those shareholders will get one UBS share for every 22.48 outstanding ones held.<\/p>\n A private gauge of China\u2019s service activities rose up in May, expanding for the fifth straight month. <\/p>\n Palo Alto Networks Americans are \u2018more afraid of running out of money than death\u2019<\/p>\n Opinion: <\/strong>Ukraine\u2019s uncertain future looks a lot like Spain\u2019s bloody past<\/p>\n India\u2019s devastating train wreck that killed at least 275\u00a0people is proof it\u2019s not spending enough on basic safety<\/p>\n
\n SPX,
\n
\n to the edge of a bull market, is proving a little tough. That said, there\u2019s nothing horrible in the setup, with tech just a little softer as oil is up after Saudi Arabia pledged another production cut.<\/p>\n
\n VIX,
\n
\n drops to its lowest since Feb 2020,\u201d notes Neil Wilson, chief market analyst at Finalto.<\/p>\n\n
The markets <\/h2>\n
\n DJIA,
\n
\n
\n
\n opened flat after Friday\u2019s powerful post-jobs rally that also sent the Dow industrials
\n DJIA,
\n
\n surging 700 points. The 10-year Treasury note is up 4 basis points to 3.730%. The dollar
\n DXY,
\n
\n is higher and gold
\n GC00,
\n
\n and silver
\n SI00,
\n
\n are lower. <\/p>\n
\n CL.1,
\n
\n
\n are higher in the wake of OPEC\u2019s decision to cut oil supply by 1 million barrels a day. <\/p>\nThe buzz<\/h2>\n
\n CIR,
\n
\n has surged toward a five-year high, following a deal to be acquired by KKR valued at $1.6 billion, including debt.<\/p>\n
\n AAPL,
\n
\n has three multi-billion-dollar opportunities in its pipeline. Apple executives will take the stage Monday at the WWDC developer conference, and are expected to unveil a long-awaited mixed-reality headset.<\/p>\n
\n PANW,
\n
\n stock is up 5% on S&P 500 inclusion, replacing Dish Networks
\n DISH,
\n
\n whose shares fell 6%. <\/p>\nBest of the web<\/h2>\n
The chart<\/h2>\n