Today isn’t looking that stormy for markets, as traders worldwide seem to like the Chinese president’s big speech.
Our call of the day — from RBC strategist Lori Calvasina — is somewhat in that camp. Her team is ratcheting down its ardor for American stocks, she says in a note titled “Curbing Our Enthusiasm.”
“Our enthusiasm is a notch lower than where we were to start the year,” RBC’s head of U.S. equity strategy writes. Her shop has cut its year-end target for the S&P 500 to 2,890 from 3,000, implying a still-not-so-shabby rise of 11% from yesterday’s close at 2,613.
Calvasina & Co. give three reasons for the downgrade: This market is getting short on drivers to take it higher; multiple contraction will kick in this year; and RBC’s valuation models suggest only modest gains in the next 12 months.
Regarding the drivers, just two of six factors that RBC tracks are positive — one tied to earnings trends, and another linked to deals and stock buybacks. The multiple shrinkage refers to price-to-earnings ratios falling as interest rates rise. Calvasina forecasts that “roughly a third of the multiple contractions seen in the past three Fed tightening cycles will occur in 2018.”
And the bank’s valuation models hint at low- to mid-single-digit percentage gains for the S&P over the next dozen months, she says.
What sectors still look good? Calvasina recommends tilting portfolios toward financials, energy and industrials, and she has upgraded utilities to a neutral rating from “underweight.”
Her remaining underweights are consumers staples and REITs. Plus, she’s knocked tech stocks down to a neutral rating, saying of that sector: “We would be sellers on any rebounds.”
Key market gauges
Plenty of enthusiasm so far this morning, with futures for the Dow YMM8, +1.11% , S&P 500 ESM8, +1.08% and Nasdaq-100 NQM8, +1.45% trading sharply higher, after the Dow DJIA, +0.19% , S&P SPX, +0.33% and Nasdaq Composite COMP, +0.51% closed with gains yesterday, but off their highs.
Europe SXXP, +0.58% and Asia have been seas (Xi’s?) of green. Oil CLM8, +1.29% is gaining, while gold GCM8, -0.02% is inching lower and the Russian ruble RUBUSD, -3.712663% keeps diving. The dollar index DXY, -0.03% is little changed, and bitcoin BTCUSD, +1.04% is back under $7,000.
See the Market Snapshot column for the latest action.
Amazon spent nearly $23 billion on R&D last year — more than any other U.S. company.
It’s followed in spending by:
✅ Alphabet – $16.6 billion
✅ Intel – $13.1 billion
✅ Microsoft – $12.3 billion
✅ Apple – $11.6 billionhttps://t.co/OLudAmQg1Y pic.twitter.com/KQ7cyemcHF
— Recode (@Recode) April 10, 2018
Here’s more evidence that Jeff Bezos is a big spender.
Amazon.com AMZN, +0.06% has topped its rivals in R&D outlays by a wide margin, as shown in the Recode chart above that’s based on 2017 data. The e-commerce giant spent $23 billion on research and development, easily above the No. 2 in this ranking — Google parent Alphabet GOOG, +0.84% GOOGL, +1.00% with its $17 billion.
In Washington news, President Trump has blasted the FBI’s seizure of his personal lawyer’s records as “an attack on our country,” and a White House decision on the situation in Syria is expected as soon as today.
The Dallas Fed’s Rob Kaplan is visiting China and saying trade issues won’t get resolved soon. He also sees two more rate hikes this year, then the pace of rises could ease in future years because of slowing growth.
An apologetic Mark Zuckerberg is set to appear before Congressional committees today and tomorrow. Here are the changes Facebook FB, +0.46% has announced ahead of his testimony. Meanwhile, the largest Black Lives Matter page on Facebook is reportedly a fraud.
Small-business confidence is drifting lower. A report on producer prices is on tap before the open, then a reading on wholesale inventories is due to hit once trading is underway.
Check out: MarketWatch’s Economic Calendar
Payments company VeriFone PAY, -1.12% is getting acquired in a $3.4 billion deal driven by a private-equity firm, and Tenneco TEN, -0.05% is buying Federal-Mogul from Icahn Enterprises IEP, -0.60% for $5.4 billion.
“No doubt he was … sending a signal to the U.S. government that he wants there to be cooperation and dialogue, not conflict and a trade war.” — Myron Brilliant from the U.S. Chamber of Commerce reacts to the speech from China’s leader that has cheered up traders.
On Equal Pay Day, here’s what Rosie the Riveter would make today.
YouTube’s video for “Despacito” got hacked, along with other Vevo clips.
How your Alexa, Fitbit and pacemaker can testify against you in court.
A museum and memorial are opening in Alabama, taking on slavery, lynching and more.
Mechanics get caught on a dashcam overcharging and taking a customer’s car on Frosties run.
More Philly success: Sixers win 14 straight for the first time since Dr. J’s era.
People love this comedian’s re-enactment of a 4-year-old falling.
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