Morgan Stanley Says Sell Best S&P 500 Rally Since ’38

Discussion in 'Wall St. News' started by ASusilovic, Apr 2, 2009.

  1. March 30 (Bloomberg) -- Investors should sell U.S. stocks following the steepest rally since the 1930s because earnings are likely to keep weakening, according to Morgan Stanley.

    The Standard & Poor’s 500 Index advanced 21 percent in the past 14 trading days, the most since 1938, according to data compiled by New York-based S&P analyst Howard Silverblatt. It closed at 815.94 last week, rebounding from the 12-year low of 676.53 reached on March 9.

    “We cannot see large upside for the S&P 500 above the 825- 850 level,” Morgan Stanley U.S. equity strategist Jason Todd wrote in a report yesterday. “In the rush to buy a cyclical recovery, it seems earnings or valuation no longer matters. We would be comfortable with this view if the earnings trough was closer, but it is not.”

    The S&P 500 lost 3.5 percent, the most since March 5, to 787.53 today as the Obama administration warned that some banks will need more government aid and that General Motors Corp. and Chrysler LLC have one last chance to restructure.

    U.S. companies will start reporting results for the first quarter in the next two weeks. Analysts, who have overestimated profits for every period since the third quarter of 2007, expect S&P 500 earnings to drop 36 percent on average, paced by retailers, automakers and semiconductor suppliers, according to data compiled by Bloomberg. They’re forecasting S&P 500 companies won’t halt the longest streak of declining earnings since at least 1947 until the fourth quarter.

    Todd said investors should consider “collaring” their positions by selling call options and buying puts on the S&P 500, thereby protecting against declines and profiting from the forecast that the gauge won’t advance much further.

    :D :D :D :D :D
  2. tortoise


    Time to load the boat with longs, then?
  3. Coincedently three banks, i.e. Goldman, Morgan Stanley and Citibank called the rally to be faded. LOL !
  4. gkishot


    The rally is going to reverse at some point so eventually they might be correct.
  5. stock_trad3r says not to sell. I think we should not listen to Morgan Stanley and, instead, listen to stock_trad3r.


    stock_trad3r's biggest fan
  6. Are these the same people that called for $300 oil?:p
  7. Countdown to 850...? :D
  8. ?.....on the Dow or S&P? :cool:
  9. :D
  10. LEGS:

    I think we have legs to 850 on the June futures.

    850 could be a very good place to fade; if not I'm looking at 875.50 area.


    Best of luck today!
    #10     Apr 2, 2009