Summary:
US stock indexes fell on Wednesday due to a drop in chip stocks, but the S&P 500 is still on track for its sixth month of gains.
US stock indexes closed lower from their record highs on Wednesday, driven by a decline in chip stocks. Despite the drop, the S&P 500 is poised for a sixth consecutive month of gains, even amidst the US election season.
The US economy grew at an annualized rate of 2.8%, driven by strong consumer spending, according to government data. This figure is slightly below economists' expectations of 3.0%, and the stock market showed little reaction to the report.
Earnings estimates for companies in the benchmark index are beating expectations at the lowest rate in nearly two years, indicating a trend of consolidation. Results from firms representing about 42% of the index's market capitalization are set to be released this week.
Concerns are also rising regarding the sustainability of the AI boom, with earnings growth for major technology companies expected to slow significantly in Q3 compared to previous quarters.
Goldman Sachs strategists believe US stocks are unlikely to maintain the above-average performance seen over the past decade, as investors shift toward bonds for better returns. They anticipate the S&P 500 will yield an annualized nominal return of just 3% over the next decade, a stark contrast to the 13% average of the last decade, and they estimate a 72% chance that bonds will outperform equities during this period.
The index could continue to fluctuate in a tight range in the near term if the upcoming earnings reports do not deviate significantly from forecast in general. The bottom end at 5,770 is acting as support.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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