Why the stock market rally can continue, says Morgan Stanley strategist who only recently warned of a death zone.

Following last week’s rally, investors appear headed for the sidelines on Monday.

Aside from a disappointing growth forecast out of China over the weekend driving oil prices higher, we have a sparse but solid lineup for the week with comments from Fed Chair Jerome Powell and a jobs update.

Here’s Deutsche Bank, summarizing what’s at stake for the latter: “It’s fairly uncontroversial to say that the latest salary report released on February 3 was a huge moment, and one that kicked off a series of events that the past month has been a struggle for most financial assets, especially bonds. So if you thought the generator of relatively random numbers, payrolls, is mostly overhyped, you haven’t seen anything yet as we approach Friday’s high number,” wrote a team of strategists led by Jim Reid.

However, the recent momentum for the market seems to have spurred one of Wall Street’s most bearish strategists to ease some of the gloom. Us call of the day returns to Mike Wilson, the Morgan Stanley strategist who warned two weeks ago that investors had pushed stocks into a death zone.

In a new note, the strategist points out how the S&P 500


“survived a crucial support test” last week by staying above its much-watched 200-day moving average. Stocks could see some gains in the near term if the dollar and interest rates continue to fall, he said.

Wilson has targeted 4,150 as the next area of ​​resistance for the S&P 500, though he still doesn’t seem ready to give up on that dead zone forecast.

“While this is undeniably positive in the near term, we don’t think it disproves the very poor risk reward many stocks currently offer given valuations and earnings forecasts that we believe remain far too high,” he said.

Wilson, who expects the S&P 500 to end the year at 3,900 — the more bearish end of Wall Street’s comprehensive forecasts — warned in late February that investors had tracked stock prices to “again dizzying heights,” driven by liquidity and greed. . He said expensive valuations meant investors were not being compensated for risk.

Others look slightly past the 200-DMA, like this fund manager noting how difficult the road will be beyond that line in the sand:

Our final word goes to Bill Blain, market strategist at Shard Capital, who has concluded that we are dealing with “directionless markets” and “a very dangerous moment.”

“There is no particular trend or belief that determines prices. The equity bounce is gone. Bonds look tired. All major themes are present, evident in the game; inflation expectations, interest rates, corporate valuations, sovereign debt sustainability, geopolitics and global threats, but there is no particular momentum behind it. That will change in a flash — but how or when we just don’t know,” Blain said in a blog post.

The markets

Equity futures




struggling for traction while 10-year Treasury yields


is lower, at 3.919% after briefly rising above 4% last week. Oil prices


fall after China sets a conservative growth target of “around 5%”. The dollars


is slightly higher.

Read also: Here’s what analysts are saying about China’s new growth target.

For more market updates and actionable trading ideas for stocks, options and crypto, subscribe to MarketDiem from Investor’s Business Daily.

The buzz

Tobacco manufacturer Altria


announced a $2.75 billion deal for e-vapor product maker NJOY.



late Sunday lowered the prices of its Model S and Model X cars to boost sales as the first quarter comes to a close. Stocks don’t do much in premarket trading.

As part of a cost-cutting measure, Amazon


is closing eight of its cashless convenience stores in San Francisco, New York City and Seattle.

Esperion Therapeutics stock


fell 22% when investors questioned data it reported on a cholesterol drug for statin-intolerant patients. Nyxoah stock


climbed 19% after the medical technology company said it hit key regulatory and clinical milestones.

A handful of US-listed Chinese stocks are lower on the heels of that modest growth target. alibaba




and Baidu


are all down 1% or more.



shares soar on a profit swing from the optical network group.

WW International (Weight Watchers)


will report after closing.

Southern Norfolk


announced a six-point safety plan after last month’s derailment of a train in Ohio carrying hazardous materials.

Factory orders should be ready by 10 a.m. in a week that will end with nonfarm wage data, where we’ll see if the January increase was a blip. And Fed’s Powell’s biennial congressional testimony is scheduled for Tuesday and Wednesday.

Read: Powell to talk to Congress about the possibility of more rate hikes, not less

The best of the internet

Is the US housing market headed for a crash? “It all depends on how high the rates go,” says mortgage veteran.

Billionaire investor Mark Mobius says he can’t get his money out of China.

The cold reality of trench warfare on the front lines of Ukraine.

The graph

Why are most investors today confused by inflation? The Twitter account behind Wasteland Capital has an idea. You just haven’t lived it yet, honey.

The tickers

These were the most searched tickers on MarketWatch as of 6am Eastern:


Security name




Bed bath & beyond


Troika Media


AMC Entertainment








Mullen Automotive


Preferred Stock AMC Entertainment Holdings


Exela Technologies

Random reads

A symbol of old, rustic Paris is about to be transformed.

Toblerone loses its alpine mountain image.

A cheap victory for the US over Europe.

Need to Know starts early and updates to the opening bell, but Register here to have it delivered to your email box. The emailed version will ship around 7:30 AM Eastern Time.

Listen to the Podcast Best new ideas in money with MarketWatch reporter Charles Passy and economist Stephanie Kelton


Leave a Reply

Your email address will not be published. Required fields are marked *