Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.
After both Google and Microsoft's financial reports failed to meet market expectations, investors in Meta Platforms hope that the company can deliver good results and convince Wall Street that the huge spending in the field of AI is worthwhile.
In the midst of its continued success, some investors are betting that the company's seemingly unstoppable rise is about to come to an end.$Alphabet-A (GOOGL.US)$/$Alphabet-C (GOOG.US)$And.$Microsoft (MSFT.US)$After both Google's and Microsoft's financial reports failed to meet market expectations,$Meta Platforms (META.US)$investors in Meta Platforms hope that the company can deliver good results and convince Wall Street that the huge spending in the field of AI is worthwhile.
Investors remain skeptical about how much money tech companies have spent on artificial intelligence and when they will start seeing returns in terms of increased growth and profitability. In April of this year, Meta raised its spending guidance to levels higher than market expectations, angering investors. Microsoft's stock price fell before Wednesday's trading session after the company reported slowing growth in its cloud computing division and said capital spending will increase again next fiscal year.
Denny Fish, who manages the Janus Henderson Global Technology and Innovation Fund with $7.2 billion in assets, said, "The key question is whether Meta will increase its capital expenditures. (The company) has a pretty good demand environment, strong revenue trends, and still reasonable valuations. But it was sold off last quarter when everything was normal except for capital expenditures, which shows how concerned investors were about that point."
Meta will report earnings after the U.S. stock market's close on Wednesday. The company has already shown some growth from artificial intelligence, as the technology helps improve targeting of advertising on its social media products. It also added new artificial intelligence features to WhatsApp, including an AI assistant that can help businesses connect with customers, answer questions, and sell goods and services through chats.
But investor patience with Meta may not be as high as with other tech giants. In 2022, Meta stuck to its metaverse strategy and invested billions of dollars in an unpopular virtual reality vision that caused its stock price to plummet twice after earnings reports. The company turned things around in 2023, announcing it as the efficiency year marked by significant cost cuts, and pleased Wall Street in January with a $50 billion buyback and first-quarter dividend.
Since the beginning of the year, the stock has risen 31%, outperforming its peers in part because of its relatively lower valuation. Meta has an expected P/E ratio of about 21 times, far below the Nasdaq 100 Index's P/E ratio of 25 times. Despite this, the stock recently fell with the broader sector rotation, and underperformance in spending could continue the selling momentum. Option data shows that the stock's implied intraday volatility is around 8.8% after earnings are announced.
According to compiled data, analysts expect Meta's capital expenditures this quarter to reach $9.5 billion, up about 50% year-over-year, and annual capital expenditures to approach $38 billion. Earnings per share are expected to increase by 59% this quarter, with revenue up about 20%.
"The recent stock price performance of tech giants who have announced earnings has highlighted investor concern about capital expenditures and the need for final performance to exceed expectations. Last week, Google's stock price fell as it invested more resources into artificial intelligence, causing spending to exceed analysts' expectations. Microsoft's stock price fell in pre-market trading on Wednesday as growth in its Azure division fell short of expectations."
Equally important is where the spending is concentrated. Bank of America analyst Justin Post wrote in a report that cost reductions for Meta's augmented reality and virtual reality projects could "greatly boost" investor sentiment, even if the funds saved are redirected to artificial intelligence spending.
"While investors have a constructive view on AI investment and opportunity, we believe investors are not supportive of spending on Reality Labs," Post wrote.
In fact, Meta CEO Mark Zuckerberg acknowledged concerns about spending in a recent interview.
"It's quite possible that a lot of companies are overbuilding right now, and when you look back, you'll feel like, 'Oh, we probably spent a few hundred million dollars more than we needed to here or there.'" But he pointed out that overspending is justified because the disadvantage of being behind in the most important technologies over the next 10 to 15 years is a disadvantage."
Editor / jayden