Analysts say the partial U.S.-China trade deal doesn't touch on thorny issues plaguing both sides, and warn talks could break down again.World Economyread more
"The Champagne should probably be kept on ice, at least until the two presidents put pen to paper," said state-owned media China Daily.Traderead more
Economists polled by Reuters had expected Chinese exports denominated in the U.S. dollar to fall by 3% and imports to decline by 5.2% in September, compared to a year ago.China Economyread more
The U.K. and EU are gearing up for what could be the busiest week in British politics since June 2016.Europe Politicsread more
The U.S. had plans to hike duties on at least $250 billion in Chinese goods to 30% from 25% on Tuesday. Despite the partial trade deal, some banks on Sunday wrote that tariff...Marketsread more
The industry has pulled in $322 billion over the past six months, the fastest pace since the second half of 2008.Marketsread more
A technical recession occurs when there are two consecutive quarters of economic contraction.Asia Economyread more
"Deepfakes" are being used to depict people in fake videos they did not actually appear in, and can potentially affect elections, diplomacy and how markets move, experts say.Technologyread more
Chinese President Xi Jinping warned on Sunday that any attempt to divide China will be crushed.China Politicsread more
Syria's Kurds said Syrian government forces agreed Sunday to help them fend off Turkey's invasion.World Newsread more
U.S. President Donald Trump said that both sides reached a "very substantial phase one deal" that will address intellectual property and financial services concerns and...Asia Marketsread more
A recovery in global growth, as well as another record year for corporate buybacks should boost earnings and stock prices, driving the S&P 500 to 3,000 this year, according to J.P. Morgan equity strategists.
The strategists reiterated their call Wednesday for the S&P to reach 3,000 this year based on a fundamental recovery in global growth and an end to temporary headwinds from such issues as trade. They expect companies to provide a boost for stock prices with their positive forward guidance.
"We expect fundamentals to improve on the back of stronger global growth," the analysts wrote.
The on Wednesday was trading near record levels, after closing at a new high of 2,933 on Tuesday. Wall Street strategists' S&P targets range from 2,750 to 3,200 for year-end.
The strategists also believe the outlook for earnings was too pessimistic and they expect the anticipated decline in first-quarter profits to turn around by the end of the reporting period, with S&P 500 companies delivering a 4% to 5% earnings surprise and profit growth of 2-3%.
Revenues are growing at an above-trend 5%, which the strategist said is a sign of healthy demand. Temporary factors impacting margins should fade as the year goes on, and recovering global growth and reflationary policies should help.
"As for performance, we expect equities to remain resilient during the reporting season as results should hint at a global growth recovery at a time when investor positioning and sentiment remains relatively low," the strategists wrote.
Companies are likely to continue reinvesting in growth opportunities, but the strategists see the bulk of incremental profits going to stock buybacks. "After a record year for buybacks in 2018, this year should be even higher at ~$850b, which would alone drive EPS growth of ~2%. This view is supported by record buyback announcements YTD of $213b led by Tech ~$46b and Industrials ~$40b," they noted.
There are also existing buyback authorizations that have not been realized yet of about $700 billion, as of the fourth quarter. Companies also still have excess cash of about $1.5 trillion, excluding financial companies, the strategists added. They also expect operating cash flow to be the predominant source for capital return, with debt-funded buybacks now at just 14% after having peaked in 2017 at 34%.
They also expect fewer negative surprises related to trade and tariffs during the first-quarter reporting period. Technology companies, household products retailers, capital goods companies and automakers all discussed trade last quarter.
"While trade and tariffs remains a headwind for margins, companies are softening the drag by raising prices where possible, idling and shifting production to geographies unaffected by tariffs, and/or passing cost to suppliers. If a trade deal were to materialize, it could be a source of positive revisions (mainly through margins) since this catalyst is mostly not in consensus numbers," the analysts noted. "Goods producers will increasingly highlight rising commodity prices as a risk; however, we expect the majority of the headwind to be passed down to end users given expanding labor markets and reaccelerating global growth."
The strategists said they remain overweight cyclical sectors, including technology, consumer discretionary, industirals and energy. They see energy as having the best risk-reward with stock prices decoupled from oil prices, and positive guidance should help the sector's earnings momentum.