{"id":75826,"date":"2023-10-23T10:06:53","date_gmt":"2023-10-23T14:06:53","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/morgan-stanleys-wilson-next-rally-attempt-will-fail-as-investors-are-punishing-earnings-reports\/"},"modified":"2023-10-23T10:06:56","modified_gmt":"2023-10-23T14:06:56","slug":"morgan-stanleys-wilson-next-rally-attempt-will-fail-as-investors-are-punishing-earnings-reports","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=75826","title":{"rendered":"Morgan Stanley\u2019s Wilson: Next rally attempt will fail as investors are punishing earnings reports."},"content":{"rendered":"
\n

Third-quarter earnings season has only just begun and Morgan Stanley\u2019s pessimistic market strategist Mike Wilson is already labelling it a disappointment.<\/p>\n

This week features a whole slate of megacap earnings (Microsoft, Alphabet, Meta Platforms, Amazon), along with third-quarter GDP, bond auctions and the possibility the 2-year Treasury will uninvert from the 10-year, having already done so against the 30-year. Earlier on Monday, the 10-year finally pierced 5%, for the first time in 16 years.<\/p>\n

\n
<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

So far, Wilson says the market has reacted more negatively to results than even what he called the \u201csell-the-news\u201d second quarter. The average one-day stock price change for a company reporting results so far is a drop of 1.6%, compared to a decline of 0.5% last quarter. Relative to the broader market, the average company reporting sees a 0.8% drop, versus a 0.2% dip last quarter. <\/p>\n

There\u2019s also a smaller percentage of positive reactions. \u201cWith several of the mega cap leaders reporting this week, this trend bears close watching,\u201d says Wilson.<\/p>\n

That negative reaction has occurred even as earnings per share have come in a solid 7% more than expected, and sales also have slightly beat expectations. But since the end of August, expectations for S&P 500 earnings this year have dropped by 0.9% and dropped by another 0.6% for 2024.<\/p>\n

<\/p>\n

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<\/p>\n<\/figure><\/div>\n

Wilson adds that the breadth of the market continues to exhibit notable weakness. \u201cWhile some may interpret this as a bullish signal\u2014i.e., oversold conditions, we believe it is a reflection of our long-standing view that we remain in a late cycle backdrop where earnings fundamentals remain at risk,\u201d he says.<\/p>\n

He notes that a few sectors \u2014 staples, healthcare equipment, telecom and energy \u2014 have been better stock market performance than the change in their earnings estimates would suggest, while autos and semis have seen the opposite. He says that supports the idea \u201cdefensives are getting a relative bid more recently as the market begins to rotate in a more counter-cyclical manner.\u201d<\/p>\n

Wilson said it was positive that the S&P 500 dropped below its 200-day moving average on Friday. \u201cWe would not be surprised to see a further move lower in price this week below the early October lows before the next attempted rally. However, based on our views on earnings, valuations and policy (both monetary and fiscal), we believe the S&P 500 will have a hard time getting back above what were previously levels of support (i.e., 4300-4400) tactically,\u201d he said. <\/p>\n

He said it\u2019s more likely the index will catch up to the average stock\u2019s performance, than the other way around, so he\u2019s comfortable with the 3,900 year-end target.<\/p>\n

The market<\/h2>\n

The wait for the 10-year yield
\n BX:TMUBMUSD10Y
\n to cross 5% is finally over, though it was short lived. U.S. stock futures
\n ES00,
\n -0.21%<\/bg-quote><\/p>\n

NQ00,
\n -0.27%<\/bg-quote>
\n were lower. Gold
\n GC00,
\n -0.46%<\/bg-quote>
\n and oil
\n CL00,
\n -0.90%<\/bg-quote>
\n futures also fell.<\/p>\n

The buzz<\/h2>\n

Over the weekend, there was modest progress in the Middle East \u2014 relief trucks entered Gaza, Hamas released two hostages, and Israel held off on a ground invasion.<\/p>\n

Chevron
\n CVX,
\n -2.28%<\/bg-quote>
\n reached a deal to buy Hess Corp.
\n HES,
\n +0.94%<\/bg-quote>
\n for $53 billion in an all-stock deal.<\/p>\n

Roche
\n ROG,
\n -0.94%<\/bg-quote>
\n agreed to buy Telavant Holdings, which has an inflammatory bowel system drug under development and is 75% held by Roivant Sciences
\n ROIV,
\n -1.71%<\/bg-quote>
\n and 25% by Pfizer
\n PFE,
\n +1.21%<\/bg-quote>,<\/span>
\n for as much as $7.25 billion.<\/p>\n

Foxconn, Apple\u2019s
\n AAPL,
\n -0.78%<\/bg-quote>
\n contract manufacturer, is reported to be under a tax audit in China.<\/p>\n

Best of the web <\/h2>\n

South Korea has been squeezed by the rise in U.S. interest rates. <\/p>\n

Iceland is holding a one-day women\u2019s strike over pay differences. <\/p>\n

A story about Israel that\u2019s not about the conflict \u2014 how a firm created an avatar so convincing that Russian agents in Africa wanted to meet him. <\/p>\n

Top tickers<\/h2>\n

Here were the most active stock-market tickers as of 6 a.m. Eastern.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\n Ticker<\/p>\n<\/td>\n\n Security name<\/p>\n<\/td>\n<\/tr>\n
\n TSLA,
\n -2.37%<\/bg-quote>\n <\/td>\n		\n Tesla<\/p>\n<\/td>\n<\/tr>\n
\n AMC,
\n -0.45%<\/bg-quote>\n <\/td>\n		\n AMC Entertainment<\/p>\n<\/td>\n<\/tr>\n
\n NVDA,
\n +1.04%<\/bg-quote>\n <\/td>\n		\n Nvidia<\/p>\n<\/td>\n<\/tr>\n
\n GME,
\n -1.60%<\/bg-quote>\n <\/td>\n		\n GameStop<\/p>\n<\/td>\n<\/tr>\n
\n NIO,
\n -1.89%<\/bg-quote>\n <\/td>\n		\n Nio<\/p>\n<\/td>\n<\/tr>\n
\n AAPL,
\n -0.78%<\/bg-quote>\n <\/td>\n		\n Apple<\/p>\n<\/td>\n<\/tr>\n
\n AMZN,
\n -0.03%<\/bg-quote>\n <\/td>\n		\n Amazon.com<\/p>\n<\/td>\n<\/tr>\n
\n PLTR,
\n -3.23%<\/bg-quote>\n <\/td>\n		\n Palantir Technologies<\/p>\n<\/td>\n<\/tr>\n
\n MULN,
\n -3.18%<\/bg-quote>\n <\/td>\n		\n Mullen Automotive<\/p>\n<\/td>\n<\/tr>\n
\n MSFT,
\n +0.22%<\/bg-quote>\n <\/td>\n		\n Microsoft<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

The chart<\/h2>\n
<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

There\u2019s a lot to unpack on this chart, courtesy of JC Parets of All Star Charts. First, he plots the ratio of inflation-protected securities to nominal yielding Treasuries, via two popular ETFs. He does this to come up with the bond market\u2019s view of expected inflation. Then he overlays that ratio with crude-oil prices. Notice how bond market inflation expectations are almost entirely driven by what\u2019s going on in the oil market. The big lesson here is probably not to put much faith in the bond market\u2019s view of inflation, but his conclusion is the multi-year secular uptrend in commodities relative to stocks is continuing. \u201cOne thing we know about commodities bull markets is that they don\u2019t just last a few years. Historically they last over a decade,\u201d he writes. \u201cSo it looks like this party is just getting started.\u201d <\/p>\n

Random reads<\/h2>\n

Necrobots? Researchers have found a way to use dead spiders to grab things. <\/p>\n

This rodeo features electric line workers. <\/p>\n

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern. <\/strong><\/p>\n

Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton. <\/strong><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Third-quarter earnings season has only just begun and Morgan Stanley\u2019s pessimistic market strategist Mike Wilson is already labelling it a disappointment. This week features a whole slate of megacap earnings (Microsoft, Alphabet, Meta Platforms, Amazon), along with third-quarter GDP, bond auctions and the possibility the 2-year Treasury will uninvert from the 10-year, having already done […]<\/p>\n","protected":false},"author":1,"featured_media":75827,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-75826","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nMorgan Stanley\u2019s Wilson: Next rally attempt will fail as investors are punishing earnings reports. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Third-quarter earnings season has only just begun and Morgan Stanley\u2019s pessimistic market strategist Mike Wilson is already labelling it a disappointment.\" \/>\n<meta name=\"robots\" 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