Daily Brief - SPX Catches Its Breath

TLDR: In a landscape of cautious optimism and market volatility, recent trends and expert forecasts hint at a complex future for the S&P 500.

The recent retreat in the S&P 500 reflects increasing cautiousness among investors, underscored by a surge in defensive assets like energy, evidenced by rising crude oil futures.

This apprehension is deepening concerns about the essential link between earnings growth and stock prices. The fear is that, without significant profit growth, the current market optimism might not be justifiable. The ongoing earnings season in April is expected to shed light on this issue.

Adding another dimension, technical analysis shows the S&P 500 is significantly above its 200-day moving average, suggesting the market may be overheated and poised for a correction. Nonetheless, historical trends indicate the possibility of further gains, as seen in previous periods when the index's 50-day and 200-day MACD were at comparable levels.

Meanwhile, despite the caution, at least five Wall Street banks have raised their S&P 500 forecasts in the last two months. Yet, strategist estimates put the median year-end target for the S&P 500 at 5,200 by the end of 2024, implying a decline from yesterday's close.

The market's mood will be critically tested with the forthcoming Personal Consumption Expenditures (PCE) data release and Chairman Powell’s speech on Friday.

Market Movers: When the SPX rallies:

Here are the best and worst performing sectors, when the S&P 500's 10D moving average has historically been 12x above its 200D moving average:

Top 3 Performing Sectors on a 1 Month Horizon:

1. Sector Energy: 3.54% return
2. Sector Consumer Discretionary: 1.47% return
3. Sector Real Estate: 1.44% return

Bottom 3 Performing Sectors on a 1 Month Horizon:

1. Sector Utilities: -0.19% return
2. Sector Materials: 0.0033% return
3. Sector Consumer Staples: 0.02% return

Asset Spotlight: Costco Stock Drops

In the last 7 occasions where Costco's stock saw a big move down, analysis from Toggle indicates a median increase in the stock's price over the next 3 months.

Earlier this month, Costco stock experienced a nearly 8% decline following the announcement of its Q2 earnings. Despite demonstrating growth in its overall business, the company's sales did not meet the expectations set by analysts.

Earnings Update: Cintas reports tomorrow

In their last earnings report, Cintas reported EPS of $3.61, surpassing the consensus estimate of $3.49 by $0.12. This performance indicated a strong financial stance, with the company achieving a revenue of $2.38 billion for the quarter, which also exceeded analysts' expectations of $2.34 billion.

For the third quarter of fiscal 2024, the consensus for EPS is projected with an average estimate around $3.40, with predictions varying from a low estimate of $3.19 to a high estimate of $3.54. This suggests a cautious but optimistic outlook from the market analysts regarding Cintas' performance.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.