The Daily Breakdown looks at US stocks as we go into Q2 with the market at a high note. The S&P 500 is up more than 10% on the year.
Monday’s TLDR
- Friday’s PCE report is in focus today
- Microsoft will unbundle Teams and Office
- A notable breakout in the utilities sector
What’s happening?
Welcome to the second quarter — and I promise, no cheesy April Fool’s puns in today’s note!
After an impressive start to the year, we have a number of sectors and stocks leading the way. Unlike last year’s tech-dominated rally for much of the year, breadth has expanded considerably in 2024.
For instance, seven of the eleven S&P 500 sectors are already up 8% or more year to date, while the index itself is up 10% so far in 2024.
It’s a strong start to the year, but at this point, even many bulls would argue that stocks could use some sort of pullback. Will we get one in Q2?
On Friday, the PCE report was released. Remember, this is the Fed’s preferred inflation gauge, and most components of the report were either in-line with or below economists’ expectations.
That’s got stocks rallying this morning in what may prove to be a quiet week. With the exception of the monthly jobs report on Friday, there’s not a lot of economic reports or earnings releases to navigate around.
Let’s see how stocks handle today’s session coming off the holiday-shortened trading week.
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The setup — PEG
A little over a month ago, we talked about how utility stocks have been trading better. Well, on Friday the utility sector ETF — XLU — hit its highest level since December.
That’s allowed stocks within the sector to trade pretty well too, like Public Service Enterprise Group.
Notice how this stock rallied into the $65 area in early March — which was resistance — and then slowly pulled back. After a big rally from the $57 area, that pullback helped give shares the necessary energy to break out last week.
Now trading higher, bulls want to see this stock stay above the $65 level. If it pulls back and holds this area as support, investors may view that as a buying opportunity.
Further, PEG pays out a dividend yield of 3.6%. It may not be a stock that receives a lot of media attention or makes headlines like Nvidia, Tesla or other top tech names.
But shares are trading at 52-week highs and the dividend yield is attractive. You can dig further into the fundamentals right here, but at the very least, this is one to keep an eye on.
What Wall Street is watching
TSLA — Tesla faced a tough first quarter, with shares dropping 29%. The decline comes amid looming Q1 delivery numbers, rising Chinese competition, European issues, and substantial short-seller gains. Investors are on watch to see how the market reacts to the automaker’s delivery results.
RDDT — Reddit’s stock plunged more than 24% in two days, settling at $49.30 on Friday — below its day-one IPO closing price of $50.44. The decline came after notable share sales by CEO Steve Hoffman and COO Jennifer Wong.
MSFT — Microsoft will reportedly unbundle its Teams and Office products globally amid antitrust concerns. It previously did so in Europe about six months ago as big tech remains in the spotlight for regulators.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.