Morgan Stanley sees an earnings wipe out ahead for Wall Street's unloved stock rally

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Morgan Stanley strategist Mike Wilson still expects "a meaningful earnings recession this year (-16% year-over-year decline) that has yet to be priced...

Hunting for optimists the Monday after an explosive jobs and debt-ceiling fueled relief rally that sent the S&P 500 SPX to the edge of a bull market, is proving a little tough. That said, there’s nothing horrible in the setup, with tech just a little softer as oil is up after OPEC pledged another production cut.

What Friday did show us is that Big Tech’s rally can spread itself around when it wants to, so more days like that and some Wall Street sourpusses may change their tune. For now, though it seems those who didn’t sell in May are being told to prune in June.

The ERP is defined as the difference between the expected earnings yield and the yield on safe Treasurys, with a higher number meaning investors are being compensated more for putting money in stocks. The markets Stock futures ES00 YM00 NQ00 are mixed after Friday’s powerful post-jobs rally that also sent the Dow industrials DJIA surging 700 points. The 10-year Treasury note is up 5 basis points to 3.737%. The dollar DXY is higher and gold GC00 and silver SI00 are lower.

U.S. regulators are planning fresh rules that will force bigger banks to lift their capital requirements by an average 20%, The Wall Street Journal reported.

 

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