With lawmakers bringing a debt-ceiling deal back from the brink over the holiday weekend, Wall Street looks ready to show its appreciation with a fresh 10-month high for the S&P 500
SPX.
Once we get through that, though, expect the focus to pivot quickly to fresh jobs numbers on Friday. Those gains are being led by technology once again, with AI chip king Nvidia climbing after announcing a boatload of new products.
Our call of the day slots right into this theme, as UBS names dozens of stocks “favorably positioned” for the fast-moving technology.
“Many UBS sector analysts think that generative AI (ie. AI that can create text, video etc.) has the potential to intensify competitive pressures, with 18 of 32 teams expecting this outcome, while 19 see a potential for higher revenues. All but one (Internet) see an opportunity for cost reduction,” said a team led by analyst Michael Briest.
For example, restaurants like McDonald’s
MCD
stand to benefit further from automated ordering and demand-based food preparation. AI will help retailers like Walmart
WMT
further understand what what consumers want, and those drivers of change will help to accelerate introduction of new products.
Automobiles are poised to benefit as well from cost reductions, in distribution, maintenance and spare parts, while aerospace and defense will see reduced costs on material and labor along with increased safety and security. Morgan Stanley
MS,
as UBS points out, is already using the technology via pilot scheme for ChatGPT to help summarize research and help produce data for financial advisors.
To be sure, lower labor costs is a theme running through most sectors, and not all sectors will see increased competitive advantages. Software is one sector where they see the possibility of increased competition via AI, as the technology builds out.
So we’ll dive right in with a list of some of the stocks they think are best placed as AI rolls out, highlighting the ones the bank has a buy rating on, unless otherwise noted. Their chart below also gives a snapshot of their views:
Aerospace: BAE Systems
UK:BA
Automobiles: Mercedes-Benz
XE:MBG
and Tesla
TSLA
Capitol Goods: ABB,
SE:ABB
Siemens
XE:SIE,
Amphenol
APH,
Keysight
KEYS,
Eaton
ETN,
Grainger
GWW,
Trane
TT,
Emerson
EMR,
TE Connectivity
Chemicals: Wacker
XE:WCH,
DuPont
DD,
Tokyo Okha Kogyo
JP:4186
Consumer Staples: Coca-Cola
KO,
Heineken
NL:HEIA,
L’Oréal
FR:OR
Exchanges: S&P Global
SPGI,
London Stock Exchange
UK:LSEG,
Hong Kong Exchanges & Clearing
HK:388
Fintech & payments: Visa
V,
PayPal
PYPL,
Mastercard
MA,
Block
SQ,
Adyen
NL:ADYEN
Food retail: Tesco
UK:TSCO,
Yum China
YUMC,
BGF Retail
KR:282330,
Sun Art
HK:6808
General retail: Walmart
WMT,
Home Depot
HD,
Nike
NKE,
Seven & I
JP:3382,
Zalando
XE:ZAL,
Inditex
ES:ITX,
Levi
LEVI
Insurers: Admiral
UK:ADM,
Ping An
CN:601318
Internet: Meta Platforms
META,
Alphabet
GOOGL,
Amazon
AMZN
Luxury goods: LMVH
FR:MC,
neutral rated Kering
FR:KER
and Burberry
UK:BRBY
Media: Tencent
HK:700,
Netflix
NFLX,
NetEase
NTES,
RELX Group
RELX,
Universal Music Group
NL:UMG
Medical Devices & Services: Guardant Health
GH,
Natera
NTRA
Johnson & Johnson
JNJ
and UnitedHealth
UNH
(both neutral rated)
Mining: Anglo American
UK:AAL
(neutral), Rio Tinto
RIO
and BHP
BHP
(both sell rated)
Oil & gas: Shell
SHEL,
Halliburton
HAL
and Schlumberger
SLB
Real estate: Equinix
EQIX,
Prologis
PLD,
SEGRO
UK:SGRO,
Digital Realty
DLR
(neutral)
Restaurants: McDonald’s
MCD,
Chipotle Mexican Grill
CMG,
Domino’s
DPZ,
The Wendy’s Co.
WEN
(neutral)
Semiconductors: AMD
AMD,
Micron
MU,
Nvidia
NVDA,
Samsung
KR:005930,
SK Hynix
KR:000660,
TSMC
TW:2330,
VAT Group
CH:VACN,
Inficon
CH:IFCN,
Comet
CH:COTN
Software: SentinelOne
S,
CrowdStrike
CRWD,
neutral-rated Microsoft
MSFT,
Adobe
ADBE
and Palo Alto Networks
PANW
Steel: POSCO
KR:005490,
Hyundai Steel
KR:004020,
Nippon Steel
JP:5401
Tech hardware: Dell
DELL,
Quanta
TW:2382,
Wistron
TW:3231,
neutral-rated Arista
ANET
and Pure Storage
PSTG
Telecoms: Telenor
NO:TEL,
Bharti Airtel
IN:532454,
China Mobile
HK:941,
neutral rated Elisa
FI:ELISA
and Telstra
AU:TLS
Transport & logistics: Deutsche Post-DHL
XE:DPW,
UPS
UPS
Wealth & asset managers: Morgan Stanley
MS,
EQT
EQT,
Discovery
ZA:DSY
and neutral-rated BlackRock
BLK
The markets
Stock futures
ES00
YM00
are solidly higher, with those for the Nasdaq 100
NQ00
up over 1%. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
is down 8 basis points to 3.72%. Oil is down nearly 2%.
The Turkish lira
USDTRY
continues to slump to fresh lows against the dollar, currently at 20.40 lira, as President Recep Tayyip Erdogan is set for a new term. Morgan Stanley is not optimistic.
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The buzz
Several votes are ahead for the deal reached between President Joe Biden and House Speaker Kevin McCarthy to suspend the nation’s debt limit through 2025, starting with a House Rules Committee vote on Tuesday.
Nvidia
NVDA
stock is up 3.8% and could reach a $1 trillion market cap on Tuesday after announcing tons new products, including a supercomputer and plans to make gaming characters come alive. The chip maker also said it’s doing a deal with WPP
WPP,
up 2%, to develop a content engine that uses generative AI for digital advertising.
We’ll get earnings from HP
HPQ
later, then Dell
DELL
on Thursday, which could confirm whether a pandemic-era tech bottleneck is for sure ending.
Ford
F
is up 3% after an upgrade to buy at Jefferies.
Newell Brands
NWL
is down 3% after a restructuring plan announced last week.
The data spotlight this week will fall on May jobs data, due Friday. Ahead of that, the S&P Case-Shiller home price index is due at 9 a.m., followed by consumer confidence at 10 a.m., then a speech from Richmond Fed President Thomas Barkin.
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The chart
Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets , has lifted her S&P 500 year-end target to to 4,250 from 4,100, and much of that is down to investor negativity. She says when AAII ( American Association of Individual Investors survey) net bullishness is at -10% in favor of the bears such as at the start of the year and currently, the S&P 500 tends to rally 15% over the next 12 months.
Here’s an example of that negativity, positioning in S&P 500 e-minis:
Top tickers
These were the most-searched stocks on MarketWatch as of 6 a.m.:
| Ticker | Security name |
|
TSLA |
Tesla |
|
NVDA |
Nvidia |
|
MULN |
Mullen Automotive |
|
GME |
GameStop |
|
PLTR |
Palantir |
|
BUD |
Anheuser-Busch InBev |
|
AAPL |
Apple |
|
AMC |
AMC Entertainment |
|
AMZN |
Amazon.com |
|
AMD |
Advanced Micro Devices |
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