Although the major indexes were on course to record their best month in more than a year, stocks ended the week down as optimistic Wall Street maintained hopes for a rally.
Approximately 50 points, or 0.2%, were lost by the Dow Jones Industrial Average (^DJI), while the benchmark S&P 500 (\GSPC) also had a 0.2% decline. The tech-heavy Nasdaq Composite (^IXIC), which was up for the majority of the day, closed down around 0.1% in late trading.
The depressing trading day follows the averages’ fourth consecutive weekly victory on Friday.
November’s stock market boom has been bolstered by strong expectations for a halt to US interest rate rises. This has put the Dow on track to have its best month since October of last year, and the Nasdaq and S&P 500 have their best month since July 2022.
The VIX, sometimes referred to as Wall Street’s “fear gauge,” finished on Friday at its lowest point since January 2020, suggesting that the positive sentiments aren’t abating. After a lengthy Thanksgiving holiday weekend, Wall Street returned to work on Monday to a subdued vibe.
However, since PCE inflation is the Federal Reserve’s favourite indicator of consumer price pressures, a new reading on the measure, which is expected on Thursday, might put the rise to the test.
Investors will be watching Cyber Monday developments in the interim to see if Americans would still indulge in holiday shopping despite tightening budgets. Black Friday in-store sales also increased, while internet sales reached a record $9.8 billion, up 7.5% from the previous year.
By the end of next year, Wall Street strategists tracked by Yahoo Finance believe the S&P 500 (^GSPC) will hit 5,100, according to analysts from Deutsche Bank and BMO Capital Markets. This is the highest estimate for the benchmark index to date.
The S&P 500 would have reached a new all-time high with this; it peaked at 4,796 in January 2022.
Chief investment strategist Brian Belski of BMO Capital commented, “We believe 2024 will be Year 2 of at least a 3-5 year process that will see US stocks exhibit more normal and typical performance, paced by a backdrop of normal and typical GDP and earnings growth, valuation, and bond yield ranges.”
According to Belski’s study, the S&P 500 typically makes a return of around 11% during the second year of a bull market.
The S&P 500 is expected to generate $250 in profits per share in the upcoming year, according to both Deutsche Bank and BMO, which are the highest estimates on Wall Street to date. The increased earnings estimate puts both estimates for the S&P 500 somewhat over the 5,000 projections that RBC and Bank of America published last week.
Remarkably, all four companies are optimistic that the S&P 500 can maintain its current valuation above its historical average due to increase in earnings.
The analysts at Deutsche Bank stated in a report on Monday, “If earnings growth continues to recover as we forecast, valuations will remain well supported around the top of the range as is typical on the pricing in of a pickup in earnings growth.”
Following Cannonball Research’s upgrading of shares from Neutral to Buy, noting “more meaningful” upside to current fiscal 2024 forecasts, Roku stock (ROKU) increased by almost 8% on Monday.
“We do not anticipate an improvement in the current patterns in the advertising sector to support our argument. Rather, we anticipate a perpetuation of the patterns we have observed since Q2 of 2022,” analyst Vasily Karasyov of Cannonball Research said in a report that was made public on Sunday.
Consensus projections published by Bloomberg place platform revenue, which includes ad revenues, money from distribution arrangements, and revenue from the over-the-top streaming service The Roku Channel, at around $3.37 billion for the fiscal year 2024.
Video advertising is expected to increase 17.5% by 2024, according to sell-side estimates, and it did so in the third quarter.
As long as the overall circumstances don’t significantly worsen, we think there is potential for both of these,” Karasyov stated.
The connected TV market is expected to expand by around 16% in fiscal 2023, according to the analyst, who also raised his price target from $88, to $116 per share. Roku will remain the market leader in this regard.
“Even before the likely beat, ROKU should outgrow the market by ~400 [basis points] this year,” he stated.
The boost was made in response to Roku’s positive fourth-quarter expectations and more indications of the ad revenue recovery.
The business, which has used several cost-cutting strategies, such as layoffs, in an attempt to reduce operational expenditures,