{"id":77616,"date":"2023-10-27T18:56:12","date_gmt":"2023-10-27T22:56:12","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/despite-a-hot-gdp-number-stocks-cant-sustain-a-rally\/"},"modified":"2023-10-27T18:56:15","modified_gmt":"2023-10-27T22:56:15","slug":"despite-a-hot-gdp-number-stocks-cant-sustain-a-rally","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=77616","title":{"rendered":"Despite a Hot GDP Number, Stocks Can\u2019t Sustain a Rally"},"content":{"rendered":"
\n
<\/p>\n

<\/p>\n

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

The stock market can\u2019t sustain a rally\u2014and that\u2019s a bad omen as the selloff gathers speed.<\/p>\n

The
\n S&P 500
\n index fell 2.5% this past week, while the
\n Nasdaq Composite
\n declined 2.6%, and the
\n Dow Jones Industrial Average
\n dropped 2.1%. That puts the S&P 500 and Nasdaq in correction territory, with a drop of 10% or more from their highs of the year. <\/p>\n

\n

The S&P 500 tried hard to rally, just as it had many times over the past few months, but those bounces have almost invariably failed. Some of these mini-rallies since the summer have lasted weeks, only to end at lower levels than the previous one, a theme that repeated itself again. This persistent selling indicates that the market has waning confidence in the economy, in earnings, and in what stocks are really worth. <\/p>\n

\u201cSentiment has turned,\u201d says Jay Woods, chief global strategist at Freedom Capital Markets. \u201cThings are starting to show breakdowns. That gives me pause.\u201d <\/p>\n

Especially now that good news is bad news once again. The U.S. economy grew at a 4.9% clip in the third quarter before inflation, which looks to be a sparkling number. Unfortunately, it only reaffirms the Fed\u2019s resolve to keep interest rates high in order to cool the economy and inflation. Though a rate hike isn\u2019t expected, investors will be watching for clues as to how long they will stay high when the central bank meets on Tuesday and Wednesday. <\/p>\n

And for good reason. The higher rates remain, the more economic and profit growth should slow as tighter policy hits the economy with a delay. That makes investors\u2014and companies\u2014doubt even good news coming from corporate earnings.
\n Meta Platforms
\n (ticker: META) warned on its third-quarter earnings call that advertising sales could slow even as its earnings and sales easily topped forecasts, causing the stock to drop 3.7%.<\/p>\n

Meta isn\u2019t alone. S&P 500 companies that have beaten third-quarter sales and earnings estimates gained an average of just 0.5% after the reports, according to Evercore ISI, half the five-year average of 1%. Such ho-hum market reactions to earnings reflect a market that\u2019s still too expensive. The S&P 500 trades at some 17 times expected earnings per share over the next 12 months. That\u2019s elevated, considering that higher yields make future profits less valuable, which should weigh on valuation multiples. Historically, the S&P 500\u2019s multiple should land somewhere in the low teens when the 10-year yield, at 4.84%, is as high as it is now, according to Evercore. <\/p>\n

\u201cThe yield is, at least in the short term, stuck up here,\u201d says Steve Sosnick, chief strategist at Interactive Brokers.<\/p>\n

Investors should hope stocks are stuck, too. While they\u2019re unlikely to make new highs, that\u2019s better than making new lows.<\/p>\n

Write to <\/strong>Jacob Sonenshine at jacob.sonenshine@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

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

The stock market can\u2019t sustain a rally\u2014and that\u2019s a bad omen as the selloff gathers speed. The S&P 500 index fell 2.5% this past week, while the Nasdaq Composite declined 2.6%, and the Dow Jones Industrial Average dropped 2.1%. That puts the S&P 500 and Nasdaq in correction territory, with a drop of 10% or […]<\/p>\n","protected":false},"author":1,"featured_media":77617,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-77616","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nDespite a Hot GDP Number, Stocks Can\u2019t Sustain a Rally | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The stock market can\u2019t sustain a rally\u2014and that\u2019s a bad omen as the selloff gathers speed. 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