Thomson Reuters
US stocks traded higher Monday after each of the major indexes recorded their strongest weekly performances of the year last week.
Major indexes gained more than 5% last week as the Federal Reserve hit pause on further rate hikes and as bond yields retreated.
But gains Monday were relatively muted as the market looked for direction following the big jump.
Morgan Stanley strategist Mike Wilson warned that the rally to start November — historically the strongest month for stocks of the year — resembles a bear market rally rather than a sign of market strength.
He said macro headwinds and a lack of fundamental drivers make any sustained upside seem unlikely.
"We think last week's rally in stocks was mainly a function of the fall in back-end Treasury yields," Wilson wrote in a Monday note. "In our view, the drop in Treasury yields was more related to the lower than expected coupon issuance guidance and weaker economic data as opposed to the bullish interpretation (for equities) that the Fed is going to cut rates earlier next year in the absence of a labor cycle."
In a note later in the day, JPMorgan's Marko Kolanovic echoed Wilson's sentiment, writing that there are a number of concerns that should be on investors' radars that suggest the gains are set to fade.
"We believe that equities will soon revert back to an unattractive risk-reward as the Fed is set to remain higher for longer, valuations are rich, earnings expectations remain too optimistic, pricing power is waning, profit margins are at risk and the slowdown in topline growth is set to continue," Kolanovic said.
Here's where US indexes stood as the market closed at 4:00 p.m. on Monday:
Here's what else is going on:
In commodities, bonds, and crypto:
