Stocks opened solidly higher. Stocks are getting back a chunk of last week’s losses this morning, led by technology and boosted by vaccine optimism. It’s “Merger Monday” with large deals announced in the semiconductor and biotech industries, along with the news that Oracle appears to have won the TikTok sweepstakes. European markets are mixed in midday trading, while Asian markets closed broadly higher.
Raising our S&P 500 target. We have raised our year-end S&P 500 Index fair value target to a range of 3,450–3,500. Fundamentals of the economy and profits are tracking more toward our bull case of 3450+ from our Midyear Outlook 2020 publication. Our new target range is based on PE of 21 and our estimate of S&P 500 earnings power of $165, which we believe may be achievable over the next 12 to 24 months.
Week ahead. This week’s economic calendar includes August’s export and import prices and last month’s manufacturing production data on Tuesday and August retail sales on Wednesday. Weekly jobless claims, housing starts, and building permits will be reported on Thursday, and Michigan sentiment on Friday. The Federal Reserve’s rate decision is on tap for Wednesday.
More election charts. This has been one of the top questions we’ve received, so we’re sharing more of our favorite election charts in a three-part series. Check out the election charts from Election Charts You Need To See: Part 1 and look for more this week, including later today in the LPL Research blog.
Technical update. US equities suffered their first back-to-back weekly losses in more than four months last week. The S&P 500 moved back below its February 2020 highs but managed to close just above its 50-day moving average (3321), ending the week at 3340. Markets are higher in early trading today, but holding above the 50-day moving average will be a tougher task as that indicator continues to rise rapidly. Below the 50-day moving average, we see next technical support at 3200.
COVID-19 news. The seven-day average of new cases fell by 1,300 over the past three days (source: COVID Tracking Project). These numbers tend to be noisy over the weekend, so we’re still watching for evidence of a bump related to Labor Day or school openings. Hospitalizations edged lower last week and are down about 17% in September. AstraZeneca resumed its vaccine trial after its safety halt while Pfizer and BioNTech proposed expanding their trial.
LPL Research in the Media
LPL Research Chief Market Strategist Ryan Detrick was quoted by Brian Sullivan recently on CNBC Worldwide Exchange discussing the fastest Nasdaq correction ever and why it might not be the major warning that many think.
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