The Fed minutes also note that "a couple" members wanted a 50 basis point cut, based primarily on the weak inflation readings.The Fedread more
Market focus is largely attuned to the Federal Reserve, with the U.S. central bank scheduled to publish its latest meeting minutes.Bondsread more
Federal Reserve members worried over future growth are highly concerned about the U.S.-China tariff battleThe Fedread more
President Trump and Apple CEO Tim Cook have had a rocky relationship in recent years, but Trump is now complimenting the executive publicly.Technologyread more
Corporate debt recently passed the $1 trillion mark in a continuing sign of global financial displacement.Marketsread more
"Federal debt, which is already high by historical standards, is on an unsustainable course," CBO director Phillip Swagel said in the report.Politicsread more
The president's remark followed a string of criticisms aimed at his predecessors, whom he claimed had ignored China's alleged malpractice on trade.Politicsread more
President Trump liked Germany's sale of no-interest, 30-year bonds Wednesday, but investors weren't so eager to buy them.Market Insiderread more
SunTrust Robinson Humphrey analysts said in a research note the "Off-Facebook Activity" feature "appears to fall somewhat short of the original pledge by CEO Zuckerberg of...Technologyread more
"If you look at the market over the past week, stocks don't need any help. They are roaring ahead, without the Fed doing anything," says the longtime market strategist.Marketsread more
Target CEO Brian Cornell still thinks the U.S. consumer is strong and spending. Target's latest quarterly results showed the big-box retailer is benefiting from that.Retailread more
Soaring values of technology companies have dominated the market's bull run, but now they are getting way too expensive as the earnings picture continues to deteriorate, a top tech analyst warned.
The tech sector is now trading at 21.4 times forward earnings, the highest level in 15 years, according to Toni Sacconaghi, AB Bernstein's senior technology research analyst. This rapid multiple expansion, which is the most pronounced this year, has reached a worrisome degree given earnings are expected to have a "startling" decline over the next 12 months, the analyst said.
Source: AB Bernstein
"Risk is increasing in tech, especially with high priced stocks," Sacconaghi said in a note Monday. "Part of tech's challenge is that it is comping against a tough 2018. Tech's earnings lagged the broader market last year, as tax reform more favorably impacted other sectors and expectations for 2020 don't improve dramatically."
Earnings for the tech sector are expected to drop by 9.9 percentage points on an equal-weighted basis in the next 12 months, compared with the broad market's 1.3 percentage points decline, according to Bernstein. The revenue picture is also not uplifting with the group expected to grow just 0.5% while the overall market is set to gain 4.7% in sales, Sacconaghi said.
"The largest stocks are emblematic of current year tech struggles: among the 17 largest cap tech companies, seven have flat to negative forward earnings growth. In particular, overall earnings growth is expected to be double digit negative for Semiconductors and Tech Services," the analyst said.
Sacconaghi is frequently the top tech analyst in the annual rankings from Institutional Investor magazine. His picks in the space have an average one-year return of 21%, according to TipRanks, which places him among the best on Wall Street.
While sounding alarms on tech's sky-high valuations and their grim earnings picture, Bernstein hasn't written off the group altogether. In fact, the firm recommends investors add cheaper names in the sector.
"While collective valuations are high, fundamentals for tech remain strong," Sacconaghi said, noting the group has above-average five-year growth expectations as well as having the highest-quality score across sectors.
The firm kept its market weight rating on tech, while encouraging investors to be cautious on "expensive names with decelerating growth or low quality scores, currently concentrated in technology services and smid-cap software," Sacconaghi said.
Bernstein screened tech stocks that have a relatively cheap valuation while scoring high in the quality factor. The stocks include Applied Materials, Dell Technologies, Lam Research and Skyworks Solutions.