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‘The high for equities is not in,’ says technical strategist who unpacks the stocks to buy now.

‘The high for equities is not in,’ says technical strategist who unpacks the stocks to buy now.


By Barbara Kollmeyer

Critical information for the U.S. trading day

Count Wharton Professor Jeremy Siegel among the stock bulls headed into the fourth quarter, versus unwavering bears like Morgan Stanley’s Mike Wilson, who sees a 10% drop ahead.

Siegel argues that bonds, which have been giving stocks the shove, have proven to be a terrible inflation hedge, but investors have forgotten that given it’s 40 years since the last big price shock. “Stocks are excellent long-term hedges, stocks do beautifully against inflation, bonds do not,” he told CNBC on Tuesday.

Don’t miss: ‘Bond math’ shows traders bold enough to bet on Treasurys could reap dazzling returns with little risk

Other stock cheerleaders out there are counting on a fourth-quarter rally, which, according to LPL Financial, delivers on average a 4.2% gain as portfolio managers snap up stock winners to spiff up performances.

Our call of the day from Evercore ISI’s head of technical strategy, Rich Ross, is in the bull camp as he declares the “high for equities is not in,” and suggests some stocks that will set investors up nicely for that.

Ross notes November is the best month for the S&P 500 SPX, Russell 2000 RUT and semiconductors SOX, while the November to January period has seen a 6% gain on average for the Nasdaq Composite COMP. He says if the S&P can break out above 4,430, the next stop will be 4,630 within 2023, putting him at the bullish end of Wall Street forecasts.

In addition, even with 10-year Treasury yields back at their highs, the S&P 500 is still ahead this week and that’s a “great start” to any rally, he adds.

What else? He says “panic bottoms” seen in bond proxies, such as utilities via the Utilities Select Sector SPD exchange-traded fund ETF XLU, real-estate investment trusts and staples, are “consistent with a bottom in bond prices,” which is closer than it appears if those proxies have indeed bottomed.

Among the other green shoots, Ross sees banks bottoming following Bank of America (BAC) earnings “just as they did in March of ’20 after a similar 52% decline which culminated in a year-end rally which commenced in Q4.”

He sees expanding breadth for stocks — more stocks rising than falling — adding that that’s a buy signal for the Russell 2000, retail via the SPDR S&P Retail ETF XRT and regional banks via the SPDR S&P Regional Banking KRE.

The technical strategist also says it’s time to buy transports DJT, with airlines “at bear market lows and deeply oversold,” while railroads are also bottoming and truckers continue to rise.

As for tech, he’s a buyer of semiconductors noting they tend to gain 7% on average in November, and Nvidia (NVDA) has been under pressure as of late. He also likes software such as Microsoft (MSFT), Zscaler (ZS), MongoDB (MDB), Intuit (INTU), Oracle (ORCL), Adobe (ADBE), CrowdStrike (CRWD) and Palo Alto Networks (PANW).

“The strong tech will stay strong and the weak will get strong,” says Ross.

The markets

Stock futures (ES00) (YM00) are dropping, with bond yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y mostly lower. Oil prices (CL.1) (BRN00) are rallying nearly 3% after the deadly hospital explosion in Gaza City, with Iran reportedly calling for an oil embargo against Israel. Gold (GC00) has shot up $20.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

Morgan Stanley (MS) posted a 10% earnings fall, but beat forecasts, with shares down. Abbott Labs (ABT) is up after upbeat results and aguidance hike and Procter & Gamble (PG) is up after an earnings beat. Tesla (TSLA) (preview here) and Netflix (NFLX) (preview here) will report after the close.

Read: Ford CEO says Tesla, rival automakers loving the strike. He may be wrong

United Airlines shares (UAL) are down 5% after the airline lowered guidance due to the Israel/Gaza war. Spirit AeroSystems (SPR) surged 75% after the aircraft components maker announced a production support deal with Boeing (BA).

Housing starts came short of expectations, with the Fed’s Beige Book of economic conditions coming at 2 p.m. Also, Fed Gov. Chris Waller will speak at noon, followed by New York Fed Pres. John Williams at 12:30 p.m. and Fed Gov. Lisa Cook at 6:55 p.m.

China’s third-quarter GDP rose 4.9%, slowing from 6.3% in the previous quarter, but beating expectations.

Middle East tensions are ratcheting up with protests spreading across the region after a massive deadly blast at a Gaza City hospital, and airports evacuated across France over terror threats. President Biden told Israeli Prime Minister Benjamin Netanyahu that “it appears as though it was done by the other team.”

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The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   TSLA    Tesla 
   AMC     AMC Entertainment 
   AAPL    Apple 
   GME     GameStop 
   NIO     Nio 
   AMZN    Amazon 
   PLTR    Palantir 
   MULN    Mullen Automotive 
   TPST    Tempest Therapeutics 
   TTOO    T2 Biosystems 

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-Barbara Kollmeyer

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10-18-23 0842ET

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