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S&P 500's Whirlwind: Big gains, warning whispers & tactical moves

S&p 500 stocks outlook

Key Points

  • The S&P 500 in a new bullish trend since early November, gapping up twice since its follow-through day.
  • The Magnificent Seven stocks rebounded after a sluggish bout in August through October.
  • However, cautionary signs include disappointing revenue guidance from Cisco, Palo Alto Networks and ON Semiconductor.
  • Five stocks we like better than SPDR S&P 500 ETF Trust.

The S&P 500 went into a new bullish trend in early November, with the SPDR S&P 500 ETF Trust NYSEARCA: SPY gapping up twice since its follow-through day on November 1. The index is up 7.73% in November. 

A look at the SPY ETF chart shows the index has already cleared an area of resistance above $451, with the next one above $453. After that, the next resistance level above $459.44, its one-year high, would come into investors’ sights. 

The so-called Magnificent Seven stocks are back on track after a sluggish bout between August and October.

Those seven stocks that led the way in the market rally in the first half of 2023 are Apple Inc. NASDAQ: AAPL, Microsoft Corp. NASDAQ: MSFT, Alphabet Inc. NASDAQ: GOOGL, Amazon.com Inc. NASDAQ: AMZN, Nvidia Corp. NASDAQ: NVDA, Tesla Inc. NASDAQ: TSLA and Meta Platforms Inc. NASDAQ: META

Tech stocks are the S&P leaders in November; three of the Magnificent Seven stocks hail from that sector, tracked by Technology Select Sector SPDR Fund NYSEARCA: XLK.

Trouble lurking below the surface

All are heavily weighted S&P components, and all are showing gains so far in November, leading the market higher. There’s plenty of upside momentum in the broader index at this juncture, despite some signs of trouble lurking beneath the surface. 

For example, Cisco Systems Inc. NASDAQ: CSCO and Palo Alto Networks Inc. NASDAQ: PANW both fell after disappointing revenue guidance, suggesting business customers were cutting back on tech spending. 

ON Semiconductor NASDAQ: ON is among the S&P’s biggest losers in the past month, dropping 24.24% after guiding toward a weak fourth quarter as the market for EV power chips cools off amid slowing sales. 

Some analysts, including BlackRock’s Jean Boivin, believe high rates still have potential to derail the S&P’s nascent uptrend before year’s end, cutting short the jolly prospect of a Santa Claus rally.

However, in its weekly market commentary issued on November 13, BlackRock noted that AI is likely a market driver going into the future. “The buzz about AI is getting louder, with tech shares maintaining their outperformance and major players getting ready to roll out new AI tools,” BlackRock analysts said.

Nvidia recently introduced new chip enhancements to power greater demand for generative AI and other AI applications. 

Could bank stocks lead market lower?

However, BlackRock analysts noted that finance stocks, in particular, bank stocks, could suffer. 

A recent Federal Reserve senior loan officer survey “highlighted how tighter financial conditions are starting to crimp the U.S. economy,” BlackRock wrote. Analysts added that demand for loans fell in the third quarter in key categories, including commercial real estate, household mortgages, and corporate and consumer loans. 

“That fits with a picture of broader economic activity being subdued. This shows the Fed’s rapid rate hikes are indeed crunching demand,” analysts said.

They noted that those developments, coupled with an easing of pandemic-era supply chain snarls, should contribute to inflation settling down in 2014.

Market performance is cyclical, and dependent upon a wide variety of factors, but despite the current broad momentum in the S&P 500, there’s reason to be vigilant. 

Large number of S&P stocks below 200-day line

According to a November 16 report by Yardeni Research, “Stock Market Briefing: Breadth of S&P 500,”  36.4% of S&P 500 stocks are currently trading above their 200-day moving averages. In addition, 41.2% of S&P stocks are showing a positive year-over-year price change. Both of those numbers are well below historical averages in bull markets.

On the other hand, Yardeni also reported that 63.9% of S&P 500 companies had a positive three-month percent change in revenue estimates.

There are clearly actionable S&P 500 stocks right now. For example, payment processor Visa Inc. NYSE: V is currently in buy range, as is Ross Stores Inc. NASDAQ: ROST, but investors should maintain a healthy dose of awareness, should pockets of weakness put a dent in the broad rally. 

Should You Invest $1,000 in SPDR S&P 500 ETF Trust Right Now?

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While SPDR S&P 500 ETF Trust currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Kate Stalter
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Kate Stalter

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
SPDR S&P 500 ETF Trust (SPY)N/A$664.390.6%1.09%25.94Moderate Buy$664.39
Alphabet (GOOGL)
3.943 of 5 stars
$253.300.7%0.33%26.98Moderate Buy$252.24
Amazon.com (AMZN)
4.8348 of 5 stars
$213.04-0.7%N/A32.48Buy$266.26
Apple (AAPL)
4.728 of 5 stars
$252.292.0%0.41%38.28Moderate Buy$248.29
Cisco Systems (CSCO)
4.8789 of 5 stars
$70.131.5%2.34%26.77Moderate Buy$74.72
Microsoft (MSFT)
4.9794 of 5 stars
$513.580.4%0.65%37.65Moderate Buy$618.97
ON Semiconductor (ON)
4.3964 of 5 stars
$52.53-0.8%N/A49.09Hold$56.68
Ross Stores (ROST)
4.3543 of 5 stars
$156.310.7%1.04%24.81Moderate Buy$162.33
Tesla (TSLA)
4.3433 of 5 stars
$439.312.5%N/A253.94Hold$363.54
Meta Platforms (META)
4.6139 of 5 stars
$716.910.7%0.29%25.96Moderate Buy$830.68
NVIDIA (NVDA)
4.9214 of 5 stars
$183.220.8%0.02%52.20Buy$222.23
Palo Alto Networks (PANW)
4.3681 of 5 stars
$207.891.2%N/A129.53Moderate Buy$216.60
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