A Wall Street hat trick may not be on the cards, with stock futures in the red ahead of an OPEC meeting and more data.
A two-day rally was never a guaranteed exit out of the bear woods anyway, as some say signs of a durable bottom are still missing.
Enter our call of the day, from the chief market technician at TheoTrade, Jeffrey Bierman, who has made a string of prescient calls on what has been a roller coaster year for the index thus far.
Bierman, who uses quant and fundamental analysis to determine market direction, sees the S&P 500
finishing the year between 4,000 and 4,200, maybe around 4,135. “Fourth-quarter seasonality favors bulls following a weak third quarter. Not to mention most stocks are priced for no growth,” he told MarketWatch in a Monday interview.
In December 2021, he forecast the S&P 500 might see a 20% decline within six months, toward 3,900 — it hit 3,930 in early May. In June, he forecast a rally and recovery to 4,300 — the index hit 4,315 by mid-August.
“I think we’re going to end up for the quarter. [The market is] deeply oversold and some stocks are completely mispriced in terms of their valuation metrics,” said Bierman, who is looking squarely at retail and technology sectors.
“The valuations on half the chip stocks are trading below a multiple of seven. I’ve never seen that ever…but what that means is when the semiconductor sector comes back, the multiple expansion is gonna be like a volcanic eruption to the upside,” he said of the sector known for its boom/bust cycles.
For example, he owns Intel
which hit a five-year low on Friday. Eventually, the company that has invested $20 billion in a new U.S. plant will come roaring back alongside rivals like Advanced Micro
“People will look back on this and go ‘Oh, my God, I can’t believe Intel was at five times earnings,’ which is insanity for this stock.”
As for retail, he’s been looking at Urban Outfitters
all places where millennials don’t shop, but the middle class does, with the all-important holiday shopping period dead ahead.
“There are 100,000 people being hired to work part time at these companies, and their margins are not coming down at all,” with no markdowns and decent sales, he said, noting those companies are being priced at a multiple of 5 times forward earnings.
“It means that you don’t think that Macy’s can put together for the Christmas quarter a comparative quarter, year over year of greater than 5%? If you don’t then don’t buy it, but I do,” said Bierman. “That’s why I’m willing to stick my neck out and buy these things. I bought Abercrombie & Fitch
at 10 times earnings…I’ve never seen it that low.”
For those who aren’t comfortable picking stocks, he says they can still get exposure through exchange-traded funds, such as SPDR S&P Retail
or the Technology Select Sector SPDR ETF
Bierman adds that investors need to be careful not to be overly concentrated in the top stocks, given “10 stocks accounted for 45% of the Nasdaq and the fact that 25% of the S&P almost accounted for about 50% of the S&P movement.”
“Everbody’s concentrated in 10 stocks that can still fall another 30% or 40%, like Apple and Microsoft. The idea of concentration risk is that everybody owns Apple, everybody owns Amazon,” he said.
And that could force the hand of passive and active managers heavily invested in those big names, driving a 10% drop for markets that “washes away all other stocks.”
are down, and bond yields
are up, along with the dollar
is retracing some of this week’s big gains, and bitcoin
is down, just over $20,000. Hong Kong stocks
surged 6% in a catch-up move following a holiday. New Zealand’s central bank hiked rates a half point, the fifth increase in a row.
are softer ahead of calls for a big production cut by OPEC +, with a decision is expected at 8 a.m. Eastern. Some say don’t be too impressed by any output reduction.
The ADP private-sector payrolls report is due at 8:15 a.m. Eastern, followed by the international trade balance at 8:30 a.m. and the Institute for Supply Management’s services index at 10 a.m. Atlanta Fed President Raphael Bostic will also speak.
South Korea’s missile fired in response to North Korea’s weapon launch over Japan, crashed and burned.
Best of the web
These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:
AMC Entertainment preferred shares
Bed Bath & Beyond
Digital World Acquisition Corp.
More market-bottom talk:
All about the investment manager who caught Yankees’ superstar Aaron Judge’s record-breaking home run.
An iPhone in a 162-year old painting? The internet is stumped.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton