S&P 500 Nears Record Territory Even As Momentum Slows: Why This Analyst Says Investors May Need To 'Proceed With Caution'

U.S. stocks appeared poised for a mixed start in the penultimate session of the year, as major averages sought to reach new highs. Opinions are divided on the sustainability of the rally. Analysts adopting a cautious stance point to the potential for a growth slowdown and a profit recession. In contrast, bullish analysts envision potential Federal Reserve rate cuts as a catalyst to bolster the 2023 rally.

The S&P 500 Index is less than 15 points away from achieving an all-time high, and the Dow Industrials have already reached a record high. Despite overbought levels, sentiment may remain guarded as traders await cues from the weekly jobless claims.

Cues From Wednesday's Trading:

Wednesday saw the market move without any significant catalysts, yet upward momentum contributed to positive closes for the Nasdaq Composite and the S&P 500 Index, marking their fourth consecutive session of gains. The Dow Industrials also reentered record territory at the close.

The majority of S&P sector classes ended the session in positive territory, except energy, communication services, and utility stocks.

US Index Performance On Wednesday

Analyst Color:

”Strong market performance this year has left investors with lofty expectations for 2024. Here's why they may need to proceed with caution,” said Morgan Stanley’s Lisa Shalett. The analyst cautioned of a slowing economy and possible recession that will likely pressure corporate profits and weigh on asset prices.

”In this environment, consider investing in securities that offer yield and companies with quality cashflows and realistic earnings goals,” she said.

Not all are guarded in their outlook. Jessica Inskip, Director of Product, at OptionsPlay, said in CNBC’s Last Call on Wednesday that she is bullish on 2024. “Consolidation may be on the horizon…2023 was about the Mag 7, 2024 is about broader participation,” she said.

Futures Today

Futures Performance On Thursday

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust SPY rose 0.10% to $476.98  and the Invesco QQQ ETF QQQ gained 0.30% to $412.72, according to Benzinga Pro data.

Upcoming Economic Data:

The Labor Department is due to release the weekly jobless claims report at 8:30 a.m. ET. Economists, on average, expect the number of individuals claiming unemployment benefits to increase from 205,000 in the week ended Dec. 16 to 210,000 in the week ended Dec. 23.

The National Association of Realtors will release its pending home sales index for November at 10 a.m. ET. The consensus estimate calls for a 1% month-over-month increase in the index compared to a 1.5% drop in October.

The Energy Information Administration is scheduled to release the petroleum status report for the week ended Dec. 22 at 11 p.m. ET.

The Treasury will auction four- and eight-week bills at 11:30 a.m. ET and seven-year notes at 1 p.m. ET.

See also: What Are Futures Contracts

Stocks In Focus:

• Tesla, Inc. TSLA rose over 1% in pre-market trading after the stock crossed the $260 threshold for the first time since mid-July on Wednesday.
• Apple, Inc. AAPL gained modestly after an appeals court ruled in favor of the company selling all variants of its watches in the U.S.
• Microsoft Corp. MSFT did not react much to an upward price target revision for the stock by Wedbush’s Daniel Ives.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures fell 1.04% to $73.34 in early European session on Thursday following Wednesday's 1.93% pullback.

The benchmark 10-year Treasury note rose 0.027 percentage points to 3.816% on Thursday.

Most major Asian markets advanced, led by the Hong Kong, Chinese and South Korean markets, although the Japanese market bucked the uptrend with a moderate pullback. On the other hand, the European markets were lower in late-morning trading on Thursday.

Read Next: Oil’s Rollercoaster 2023: Crude’s Volatile Year In Review And What Awaits In 2024