Analysts see US stocks rallying

Some analysts think US stocks are about to rally.

Ed Yardeni, president of Yardeni Research, told CNBC recently that the S&P 500 will rise as high as 2,300 by mid-2017.

"Is there a recession around the corner? I don't see it," said Yardeni. "Over this [one-]year period, I think earnings can grow 6 or 7 percent."

Kristina Hooper, head of US capital markets research and strategy at Allianz Global Investors, also sees the S&P 500 surging 5 to 10 percent.

"We could see some kind of rally that could last until the FOMC meeting in a few weeks," Hooper told CNBC recently.

However, after the meeting, Hooper thinks volatility will jump and by the end of the year, the S&P 500 will return to current levels.

Stocks rise as US market looks "more expensive than ever"

Stocks rose on Friday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.4 percent.

Bank of America Merrill Lynch’s chief investment strategist Michael Hartnett wrote in a note on Friday that redemptions from equity and high-yield funds over the past four weeks have pushed markets close to a “contrarian ‘buy’ signal” and threatening “bear capitulation” upside for risk markets.

On the other hand, it is hard to see how much upside there can be for markets when US stocks are already more expensive than ever based on price-to-sales ratios.

Markets mixed

Stocks were little-changed on Thursday.

The Shanghai Composite Index rose 0.3 percent but the Nikkei 225 and the STOXX Europe 600 edged up just 0.1 percent while the S&P 500 was flat.

US crude oil slipped 0.2 percent while the US 10-year Treasury yield fell to 1.823 percent from 1.87 percent on Wednesday.

Strategist Jim Paulsen thinks that the S&P 500 should soon hit a record high but the view among other analysts remain mixed.

Stocks rise as Greek debt deal reached but Japanese debt may need central bank bailout

Stocks were mostly higher on Wednesday.

The S&P 500 rose 0.7 percent, boosted by gains in energy stocks after US crude oil 1.9ercent.

The STOXX Europe 600 jumped 1.3 percent after the euro zone and the International Monetary Fund reached a compromise deal on Greek debt relief.

In Asia, the Nikkei 225 jumped 1.6 percent even though the Japanese government has the world's heaviest debt burden.

Bill Gross thinks that the Japanese cental bank will eventually need to buy that debt and forgo repayment to help the government cut its debt burden.

Or maybe Japanese workers will work until they reach the grave to help the government pay off its debt.

US and European stocks jump

Stocks in the US and Europe rose sharply on Tuesday.

The S&P 500 jumped 1.4 percent and the STOXX Europe 600 surged 2.2 percent.

“Some of the economic news that’s come out has been fairly nice,” said Tom Carter, managing director at brokerage JonesTrading. “There‘s the underpinnings of something to build on.”

However, in Asia, the Nikkei 225 fell 0.9 percent while the Shanghai Composite Index fell 0.8 percent.

Stocks mostly fall but rise in China despite need for "massive bailout"

Stocks mostly fell on Monday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 0.5 percent.

However, the Shanghai Composite Index rose 0.6 percent even as banking analyst Charlene Chu of Autonomous Research warned about China's debt problem.

Chu said that "China is nowhere close to deleveraging" as it is "still adding 10 to 20 percentage points to the ratio of credit to GDP every year".

Chu also said that despite government rhetoric, action to manage the debt problem has been limited because "the idea that China needs a massive bailout in the trillions of U.S. dollars isn’t something I think the authorities are on board with or accept yet".

Fed rate hikes "not the stuff that would push stocks into a bear market"

The Federal Reserve may be ready to raise interest rates soon but some investors appear sanguine about prospects for stocks, according to a recent Wall Street Journal article.

“There is a lot of money globally chasing very few high-quality assets,” said Mark MacQueen, co-founder and portfolio manager at Sage Advisory Services Ltd.

Ben Mandel, global strategist at JP Morgan Asset Management, thinks that while first-quarter earnings for US companies were poor, “that may have been a nadir", and that US stocks could offer mid-single-digit annual returns by the end of this year.

David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, said: “No matter whether the Fed raises rates in June, July or later, the key point is that the Fed is in for a very slow pace of normalizing its interest-rate policy, which is not the stuff that would push stocks into a bear market."

Stocks rise but new high remains elusive

Stocks rose on Friday.

The S&P 500 rose 0.6 percent, the STOXX Europe 6 jumped 1.2 percent, the Nikkei 225 rose 0.5 percent and the Shanghai Composite Index rose 0.7 percent.

The S&P 500 rose 0.3 percent for the week and is up 0.4 percent so far this year.

Still, a Bloomberg article noted that the S&P 500 has now gone a full year without making a new high.

More often than not, such dry spells are ominous for equities. Among the 13 instances since 1946 that began with stocks going as long as they have now without posting new highs, 10 ended in bear markets.

On the bright side, on the three occasions when bull markets survived such slumps, U.S. equities went on to rise 22 percent in the year after a new high was reached.

S&P 500 in negative territory as hedge funds sell

Stocks fell on Thursday.

The S&P 500 fell 0.4 percent, turning negative for the year.

Hedge funds have been a contributor to the market's poor performance.

According to Andrew Birstingl of FactSet, hedge funds decreased their exposure to equities by 6.9 percent in the first and sold off assets in every sector that FactSet tracks.

US stocks flat as Fed appear poised to raise rates

US stocks were flat on Wednesday after minutes from the Federal Reserve’s April meeting showed that a June interest-rate increase was a possibility.

Bank stocks rose though on expectations that higher interest rates would widen the spread between what banks charge on loans and what they pay on deposits and hence boost earnings.

Many investors were apparently surprised by the prospect of faster rate rises. The yield on the US 10-year Treasury note jumped to 1.882 percent on Wednesday from 1.759 percent on Tuesday, the largest one-day advance since December.

“I thought it was going to be one or two rate increases this year,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Now the door has been opened to two or three,” he added.

Stocks mixed, BofAML signal contrarian buy

Stocks were mixed on Tuesday.

The S&P 500 fell 0.9 percent, the STOXX Europe 600 was little changed and the Nikkei 225 jumped 1.1 percent.

Oil rose, with US crude-oil futures rising 1.2 percent to a seven-month high.

The yield on the US 10-year Treasury note rose to 1.759 percent from 1.752 percent on Monday as Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams said in an event on Tuesday that the decision on whether to raise rates at the 14-15 June meeting depends on the data.

The continuing uncertainty may be discouraging investors from committing more money in the market. “A lot of people are still waiting for more clear views on where the global economy is going to go,” said Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management.

On the other hand, weak sentiment may be a reason to buy stocks, according to Bank of America Merrill Lynch's equity and quant strategy research team.

In a note on Monday, the team pointed out that Wall Street strategists on average are recommending just 52 percent allocation to equities, the lowest in over a year. "Bearish sentiment is typically bullish for equities, and this model recently generated a contrarian buy signal."

Markets rise but Wall Street banks see painful summer for stocks

Markets were mostly up on Monday.

The S&P 500 rose 1.0 percent, the Shanghai Composite Index rose 0.8 percent and the Nikkei 225 rose 0.3 percent. The STOXX Europe 600 rose less than 0.1 percent.

US crude oil rose 3.3 percent to $47.72 a barrel, its highest settlement since 3 November, while the yield on the US 10-year Treasury note rose to 1.752 percent from 1.705 percent on Friday, its biggest one-day yield gain since 20 April.

The buoyancy in stocks may be short-lived though.

The Wall Street Journal reports that “Bank of America Merrill Lynch, Goldman Sachs and J.P. Morgan are all urging investors to rotate out of equities because they see a painful summer ahead”.

Cash is dead?

Harvey Jones at Motley Fool thinks that cash is dead.

So farewell cash. You were much admired in your prime, the people’s investment, loved by the masses. Many went as far as to say that cash was king. Your slow decline over the last seven years or so has been painful to behold. At least now the misery is over...

Cash is dead. Long live shares!

Ironically, if enough people think that cash is dead, the contrarian strategy would be to move to cash.

However, a move to cash now cannot be considered contrarian.

Bank of America Merrill Lynch reported last Friday that investors pulled cash out of global equity funds again in the latest week, bringing outflows over the last five weeks to the highest level in almost five years.

Stocks mixed amid heightened anxiety

Stocks were mixed on Friday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 fell 1.4 percent.

Jon Adams, senior investment strategist at BMO Global Asset Management, said: “There’s heightened anxiety.”

Indeed, in the latest Wall Street Journal survey of business, academic and financial economists, forecasters estimated, on average, that the US had a 20 percent chance of falling into recession in the next year, up slightly from the 19 percent in last month’s survey.

Stocks mixed, Fed expected to delay rate hike

Stocks were mixed on Thursday.

The S&P 500 was little changed, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 rose 0.4 percent.

US crude oil rose 1 percent while the yield on the US 10-year Treasury note rose to 1.758 percent from 1.737 percent on Wednesday.

“Investors don’t have a reason to buy,” said Randy Warren, chief investment officer at Warren Financial.

Jim Paulsen, chief investment strategist at Wells Capital Management, added that while he does not expect a big downturn, “any information suggesting the consumer is fading would increase anxieties quite a bit”.

Indeed, economists apparently think that the Federal Reserve will be hesitant to raise interest rates. A recent Reuters poll showed that economists think that the Fed will likely wait until September before raising interest rates again.

US stocks fall as environment "looking tougher"

US stocks fell on Thursday.

The S&P 500 fell 1.0 percent after weak earnings from Macy’s fueled concerns about consumer spending.

“The guidance from companies is that the environment continues to be tough and may be looking tougher,” said Thomas Melcher, chief investment officer at PNC Asset Management.

European stocks also fell. The STOXX Europe 600 fell 0.4 percent.

This setback for stocks comes even as an economist from the Federal Reserve points out the stock market may not be a reliable indicator of the economy.

“There’s a definite divide between the state of the economy and any decline you might see in the equity market,” Julieta Yung, an economist in the research department at the Fed Bank of Dallas, told Bloomberg.

Also, oil prices painted a more optimistic picture on Wednesday, with US crude oil jumping 3.5 percent.

And earlier in Asia, stocks rose. The Shanghai Composite Index gained 0.2 percent while the Nikkei 225 rose 0.1 percent.

Stocks rise but face “more headwinds than catalysts”

Markets rose on Tuesday.

The S&P 500 rose 1.2 percent, the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 jumped 2.2 percent.

US crude oil jumped 2.8 percent.

Jonathan Corpina, senior managing partner at Meridan Equity Partners, said that Tuesday's rally “shows us investors want to be in this market, but they’re not fully committed”.

However, Jeff Carbone, managing partner at Cornerstone Wealth, said that “there are more headwinds than catalysts” to push stocks higher.

Indeed, Adam Shell at USA Today listed five roadblocks that are holding the market back.

1. Stocks are not cheap.

2. Price ceiling is hard to crack.

3. The US dollar has turned back up.

4. Political risk is back.

5. Corporate earnings have been shrinking.

China's debt may not be so bad but could lead to 'lost decade'

How big is China's debt problem? While many view it with concern, some are more sanguine.

Mark Tinker, head of Axa Investment Manager's Framlington Asian equities business, said that despite having an alarmingly high debt-to-GDP ratio of more than 250 per cent, China is not about to trigger an emerging market crisis.

According to Tinker, most of the debt load is domestic, meaning little foreign currency exposure. Also, much of it comprises short-term bank loans to special-purpose vehicles set up to fund local government infrastructure that can ultimately be repackaged as long-term bonds and sold, via banks, to institutional investors.

Investment bank Macquarie apparently has similar views. Valentin Schmid at Epoch Times wrote that according to Macquarie, “debt under state capitalism is different from that in market economy”. In China, the government owns most of the banking system and can tell banks to roll over debt indefinitely.

The real concern, rather, is that doing so in an “environment of slow growth amid collapsing productivity ... could instead lead to the scenario of Japan’s ‘lost decade’”.

US stocks rise despite disappointing jobs report

Markets were mixed on Friday.

The S&P 500 rose 0.3 percent despite a US April employment report that showed a lower-than-expected increase of 160,000 jobs.

However, the STOXX Europe 600 fell 0.4 percent, the Nikkei 225 fell 0.3 percent and the Shanghai Composite plunged 2.8 percent.

US oil prices rose 0.8 percent while the yield on the US 10-year Treasury note rose to 1.779 percent from 1.756 percent on Thursday.

Stocks mixed, liquidity in China seen feeding commodity bubble

Stocks were mixed on Thursday.

The S&P 500 was little-changed while the STOXX Europe 600 rose 0.3 percent.

Earlier in Asia, the Shanghai Composite Index rose 0.2 percent even though the Caixin China services PMI fell to 51.8 in April from 52.2 in March but the Hang Seng Index fell 0.4 percent.

Andrew Sullivan, managing director at brokerage Haitong International in Hong Kong, said that “it will be a concern that despite a large injection of liquidity [by Chinese authorities], the service sector isn’t booming”.

However, some of that liquidity may be making itself felt in commodity markets. From CNN:

Steel and iron ore prices have buoyed in recent weeks. Other commodities -- including cotton and even eggs -- are also reported to have seen startling surges on Chinese futures exchanges. The moves have prompted some experts to worry that a new bubble is forming...

“Growing regulatory concerns over speculation in commodities are another example of how throwing more credit at China's economy creates more problems than it solves," said Andrew Colquhoun of Fitch Ratings. “Risky and speculative activity intensifies when credit growth is strong, as it currently is."

Stocks fall, China faces rising defaults

Stocks fell on Wednesday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 tumbled 1.1 percent and the Shanghai Composite Index slipped 0.1 percent.

The yield on the US 10-year Treasury note fell to 1.786 percent from 1.800 percent on Tuesday.

"The continued narrative is that the global economy is not very strong, even if the US is the best of the bunch," said Joe Bell, a senior equity analyst at Schaeffer's Investment Research.

While Chinese stocks held up relatively well on Wednesday, China is at risk of seeing a rise in defaults as corporate borrowers face a record 3.7 trillion yuan of local bond maturities through year-end.

Markets fall except in China

Markets fell on Tuesday.

The S&P 500 fell 0.9 percent as US crude oil plunged 2.5 percent.

Elsewhere, the STOXX Europe 600 fell 1.7 percent and the Hang Seng Index plunged 1.9 percent.

“Our clients are very edgy, they’re nervous,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.

“There’s no real reason at the moment for the market to be making new highs,” said Kenny Polcari, director at brokerage O’Neil Securities.

“What we need is earnings growth and earnings surprises,” said John Bailer, portfolio manager at the Boston Company Asset Management.

Among the few gainers on Tuesday was the Shanghai Composite Index, which jumped 1.8 percent even as the China manufacturing PMI by Caixin fell 0.3 in April to 49.4, the 14th consecutive month of decline.

Stocks mixed, oil falls as rally seen capped

Markets were mixed on Monday.

The S&P 500 rose 0.8 percent but the STOXX Europe 600 slipped 0.1 percent and the Nikkei 225 plunged 3.1 percent.

US crude oil fell 2.5 percent as a Bloomberg report suggested that the oil price rally is not as deep-rooted as it looks at first glance.

The report noted that while front-month futures for US crude have risen 21 percent this year, the five-year-forward contract fell 2.6 percent over the same period. It suggested that this reflects the view that shale oil production could rebound as prices recover, capping any rally.

This in turn means that oil stocks may have rebounded too far, with some analysts saying that energy stocks are already pricing in significantly higher long-term oil prices.

Sell in May or hold?

Stocks in the United States fell last week, but there are reasons to think that further falls could be limited in May despite the month's negative reputation.

The Standard & Poor's 500 Index fell 1.3 percent last week, its biggest loss since the week ended 5 February.

Despite that loss, the S&P 500 still finished April up nearly 0.3 percent for its first two-month win streak this year.

However, with the month of May up next, is it time to follow the adage "sell in May and go away"?

Analysts cited by CNBC mostly think not.

Paul Hickey, co-founder of Bespoke, said: "We're seeing strong breadth in the market," he pointed out. "As long as that holds in there, it's a reason to hold in May, not sell in May."

Daniel Suzuki, Bank of America/Merrill Lynch equity strategist, said underweight positions and a lack of positive sentiment "are reasons to believe the market can grind a little bit higher from here". However, he also sees stocks ending the year at lower levels and that "we would be fading the rally."

"Historically this is the kind of year" for sell in May, said Sam Stovall, chief US equity strategist at S&P Global Market Intelligence. "We are in the fourth year of a president's term in office, in which two unknowns are running for president."

Still, Stovall did not recommend selling the market but rotating stocks instead, pointing out that consumer staples and health-care stocks historically show strong outperformance in the May to October period.