Rising Outlook Lifts 3 of Our Positions
Corning's latest outlook lifts some of our portfolio names as market strategists become more cautious ahead of quarter earnings.
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*Market strategists are getting more cautious ahead of the June quarter earnings season
*Corning cited generative AI demand for lifting its June quarter outlook
*Keefe Bruyette sees rate cuts increasingly likely, supporting these portfolio positions
Trading volumes are better than they were late last week, but they are still trailing the three-month moving averages even with a few hours left in Monday's market session. The reason behind that can be traced back to our market game plan for this week, and the topic du jour: the market’s stretched valuation and overbought status. In that game plan, we shared the potential for a market pullback but stirring the pot, long-term market bear U.S. equity strategist Mike Wilson at Morgan Stanley is out calling for a 10% market correction between now and the U.S. presidential election. Others, like Goldman Sachs GS, are echoing our thoughts about the importance of the June quarter earnings season and the market.
Goldman’s take is that we could see a painful two-week stretch in August if earnings don’t live up to expectations, and Citigroup joined the growing chorus that we could see a pullback in the market. Adding to that, Piper Sandler announced it has joined Canaccord Genuity in no longer publishing S&P 500 price targets. Piper also shared its recommendation that investors focus on quality companies that are growing their earnings faster than the S&P 500 and reasonable valuations. Good to hear, but that’s been our point of focus for some time now and will remain so.
Corning Raises its Outlook, Lifting These 3 Portfolio Holdings
We can thank Corning’s GLW positive June quarter pre-announcement for lifting our shares of Nvidia NVDA, Marvell MRVL and Qualcomm QCOM on Monday. Corning lifted its June quarter revenue to $3.6 billion from its prior guidance of $3.4 billion citing the “strong adoption of our new optical connectivity products for Generative AI.”
While that is positive for those three portfolio plays, of the three it is especially confirming for our thinking on Marvell’s enterprise networking and carrier infrastructure businesses. We continue to see those two segments rebounding as AI adoption grows and data creation/consumption pressures existing digital infrastructure.
The next catalyst we are watching for NVDA, MRVL and QCOM shares as well as for Apple AAPL and Universal Display OLED shares, is the June revenue report from Taiwan Semiconductor TSM.
Keefe Bruyette Sees Rate Cuts Increasingly Likely, Supporting These Portfolio Positions
Research and investment banking firm Keefe Bruyette is out with positive comments on financial stocks sharing that Fed rate cuts are “growing increasingly likely within the next few months…”
The firm's thinking is that, as rate cuts unfold, it should bring cash sitting on the sidelines back into the market. We pointed this potential out to you several weeks ago, and to the extent that upcoming data adds support for the Fed to start dialing back its restrictive monetary policy sooner than its December policy meeting, it would be constructive for the trading operations at Morgan Stanley MS and Bank of America BAC.
Such a pull forward would also be a catalyst for our shares of United Rentals URI, Vulcan Materials VMC and Builders FirstSource BLDR.
At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, QCOM, AAPL, OLED, MS, BAC, URI, VMC and BLDR.
