S&P 500 Target Hike to 6000, Tech's June Dominance, “Mag 7”: Tesla Out, Broadcom In? 6/17/24

Carl Quintanilla (0:00)

Market insight and analysis.

SPEAKER_2 (0:01)

You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:06)

Good Monday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Sara Eisen, Mike Santoli at Post 9 of the New York Stock Exchange. Cramer and Faber have the morning off. Futures a bit soft on this holiday shortened week after the NASDAQ's record close on Friday. S&P now up seven of eight weeks as more strategists raise their targets over the weekend. Our roadmap begins with Wall Street's bullish expectations.

The S&P getting a new top target of 6K and eyeing its 30th record of the year.

Sara Eisen (0:33)

Plus Big Tech's dominance, 17 of the top 20 performers coming from the IT sector this month. Goldman Sachs saying AI continued to fuel the boom.

And shares of Autodesk rallying on news that activist fund Starboard Value has taken a $500 million stake in the company. We've got a lot of color on that one.

Carl Quintanilla (0:51)

Let's begin with the markets as we do kick off this holiday shortened week. Of course, the news over the weekend, Goldman upping their year-end target and Evercore ISI.

Mike, at a time where we were starting to get a little antsy about narrowing breaths.

Michael Santoli (1:03)

Well, I think we're still antsy about it. What's interesting is the targets are all the market cap weighted S&P 500 And we were in a position, which was somewhat interesting, which is even the most bullish street target was not particularly bullish in the grand scheme of things. And in fact, going into the weekend, the average and median sell side target for the S&P was below where the index itself was. So that creates this sort of catalyst for somebody on the sell side to say, do I want to essentially capitulate a little bit or acknowledge the underlying strength or do I want to fight it? So we have a couple of targets go up, 6,000 on the S&P is up 10% from here.

So when the most bullish target on Wall Street is 10%, it doesn't seem to me as if the brokerage community is completely bulled up and is saying everything is great and don't worry about anything.

On the other hand, it does show you that the index itself has kind of left behind not just the psychology, but anybody trying to beat it or keep up with it. And I think that's the source of unease in this market is, you know, the average stock out there has been languishing relative to the S&P. Does that tell us something about the economic outlook and what is being discounted? Or is it just AI momentum kind of consuming all the fuel?

Sara Eisen (2:16)

Well, if you read some of these reports, Goldman Sachs, let's hit that one, because David Costa, and he'll be on this week to talk about it, but he didn't change his earnings expectations overall for the market, 2024, 2025 unchanged, but stellar earnings growth by five mega cap tech stocks have upset the typical pattern of negative revisions to consensus EPS. They didn't change their outlook for real yields either.

Michael Santoli (2:39)

Exactly.

Sara Eisen (2:39)

It wasn't like a call on, oh, we're gonna view the market better now necessarily. It's that what's happening with big cap tech and how that's influencing the earnings picture.

Michael Santoli (2:48)

Exactly, and it's giving higher conviction of the achievability of the index earnings because it is in these small number of names that seem to have tremendous earnings momentum. You know, David Costin also kind of resorts to, oh, what if you look at the equal weighted S&P 500 and look at how the valuation there is more modest?

That is true, but it's still just taking the outsized profits of the, let's say top eight or 10 growth stocks and spreading them across the entire index. I mean, the earnings are still there, even if you dice up the index separately.

And so the median forward PE on the S&P 500 is probably 19 plus. It's not 16 like the equal weight said. My point is, you can't get away from the idea that the way this marketplace defense is by buying the most high conviction names, the highest quality names, the largest names, the ones with the best earnings momentum, and they're all the same stocks. Everything I just described is like eight or 10 stocks in the market right now.

Carl Quintanilla (3:50)

This was the subject of B of A's note last week where Savita talked about the fact that we all sort of have shock from COVID, shock from the GFC, big peace and barons over the weekend about Gen Z and their risk tolerance. And as a result, you wind up in maybe the most aggressive growth names, right? Secular growth names.