VIDEO: What's Driving S&P 500 to Multi-Month High?

In today’s Daily Rundown, Chris Versace discusses the factors that have the S&P 500 approaching 6,000, a level we haven’t seen since late February. 

We also discuss what we’ll need to see for the market to move demonstratively higher from here, and why we could see some renewed market volatility as we move from this week’s economic data to those coming next week. 

Chris also recaps this week’s Portfolio moves and explains why we’ll be gauging the post-IPO performance of Circle CRCL shares. 

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace. It is Thursday, June 5, and I hope you found my conversation with David Miller from Catalyst Funds in this week's "Stocks and Markets" podcast insightful. I know I did. I loved sharing those conversations with you. Hopefully, you had a chance to listen to it yesterday when we released it. But if you didn't, please be sure that you do. Again, I think you're going to find it rather interesting, helpful, constructive.

Call it what you will, but I think you'll enjoy it. Now, let's turn to what's happening today. You probably noticed that the market is moving higher, with the S&P 500 nearing the 6,000 level, a place we haven't been since late February. I think there's a few things going on and they bear discussing. So let's get to it.

What's driving the market higher, this rebound that we've seen over the last few weeks? Well, a couple of things. I think we can say that the earnings season was arguably better than expected. But-- and this is the big but-- we have seen a larger than usual number of downward adjustments to earnings expectations for the current quarter thanks to tariffs. And so far, no trade deals.

The economy, well, it too has been holding up better than expected. We've talked about these upward revisions in the Atlanta Fed GDP now model last week and earlier this week. But as we discussed when we broke down the May ISM PMI data for the current month of May or the just reported month of May, what did we see in the new order data? Not very constructive, especially on the services side where that slipped into contraction territory.

We're also seeing a accelerated slowdown, we can call, it in the number of jobs created. Not jobs being lost, just a slower pace of hiring. And this came in the ADP Employment Report for May, the Fed Beige Book, but also some of the comments that we saw in the May Challenger Job Cuts Report that we shared with you this morning.

What does this tell us? The economy is likely downshifting. If that continues, it could mean that some of the earnings expectations we've talked about for the S&P 500 for the back half of the year, they may need to be dialed back, especially if there are no trade deals anytime soon. But why then, is the market moving higher today?

Well, we've heard reports that President Trump and China's Xi are in conversation today with some movement potentially. But ultimately-- ultimately, what we learned today is that their conversation will hopefully renew or jumpstart trade conversations between the US and China. Now, when I recanted those things, trade talks, tariffs, they kind of stuck out. And I will say this, we would be happy to hear about progress on trade talks, but we recognize that ultimately details of any trade deal matter.

We've said this before. We're going to say it again if need be. The details matter. And until we have firm trade deals with details spelled out, there could be a lot of speculation on what's going on. And I suspect that the market will continue to most likely trade based on the headline it most lately or most recently sees.

I don't know about that English folks, but I think you get the gist that the market is likely to be volatile, trading back and forth, up and down based on what it sees last. Now, if we see the market continue to trend higher, with the S&P 500 moving to 6,000, possibly 6,100 near term, we're going to have to ask ourselves, has anything really changed on the tariff and trade front in the last few weeks. And I think as you get from the gist of what I'm saying, the short answer is no, not much.

Now, what this tells us is that for the market to move demonstrably higher, we are going to need to see progress on those fronts. They could bring some visibility. They could perhaps lead to some greater comfort with earnings expectations for the back half of the year. But make no mistake, it's going to be real progress, trade deals and details on trade, but also, too, on Trump's "big, beautiful bill" that is winding its way through the Senate and could be voted on hopefully before the July 4 holiday. So we'll have to see.

Now, that's what could push the market higher. Currently, the market is not overbought when we look at the RSI levels either for the S&P 500 or the NASDAQ composite, but they also aren't that far off either. We could say too, that looking at the Fear and Greed Index, it's pretty evident that greed is back in the market.

Here's my concern very near term. I shared it in some of our writings, but let's just spell it out here. If we see a weaker than expected May Jobs Report tomorrow. Remember, the consensus is 130,000 jobs. Big miss on ADP and those other comments that I mentioned.

If we see a much weaker than expected Jobs Report, bad news will be good news for the market and we could see the market move even higher tomorrow because the market is likely to think the Fed is going to have to come to the rescue with these weak job numbers. But as we talked with you yesterday, unless we see job losses, the fact that we saw the prices component and the ISM Services PMI jump and remain at elevated levels for the manufacturing PMI for the month of May, I do not think that the Fed is going to do anything.

Remember, our comment several months ago. Fed Chair Powell shared that there might be some pain to get to the Fed's 2% target. This could very well be that pain. But again, we'll have to see how it all develops.

And for those who are wondering, Chris, you're making these comments about the market. I would share with you, folks, remember that we don't buy the market. We like to focus on stocks, companies, if you will, that are benefiting from structural change, poised to deliver superior EPS growth. We also try to be disciplined buyers. And I would argue that the moves we made this week, picking up more Marvell when we did, picking up more shares of Elastic when we did, and even starting a new position in SuRo cap shares all land in that disciplined category.

Now, what will we be doing? We will continue to follow the data, be it economic or what we're hearing for companies in the portfolio or those that surround them, connecting the dots along the way. We've had a number of alerts to you doing that last week, earlier this week. We will continue as the investor conference season continues.

Case in point, I would suggest that if you haven't read them, please be sure to see our comments about Universal Display and Elastic this morning, both of them presented at the B of A Global Technology Conference. Universal Display sharing that the current quarter is tracking a little bit better than expected. And Elastic confirming our view that their guidance issued last week was overly conservative.

Remember, it was that overly conservative guidance that tanked the shares. And if you go into and read the alert, we spell it all out. We share management's comments, and you'll see that effectively the call we made last week that guidance was overly conservative, well, that was correct. Now, before we end today's video, I want you to make sure that you follow the shares of Circle, ticker symbol CRCL.

This is the latest high profile IPO to price. The deal priced at $31, well above the $27 to $28 target range. And the number of shares offered was also upsized.

Now, we don't get involved in IPOs, you know that. But why are we watching the shares of CRCL? Well, because it's the latest high profile IPO, the reception that it gets, how it trades in the after market. It could bring another layer of confirmation that the IPO window is opening. And yes, that wouldn't be very good for our shares of not only Morgan Stanley and Bank of America, but also SuRo cap shares as well.

Now, folks, I have to say we've got a lot more coming your way today and tomorrow, so please be sure to check your emails. Check your alerts. We want to make sure you're getting our latest thoughts. And as I like to say, if we make any moves with the portfolio, we want you right there with us. Thanks for watching.