Financial analyst Carter Worth discusses stock market trade ideas and market headlines with Dan Nathan and Guy Adami. Topics include S&P 5000 watch, AI bloat, DIS, NKE, WYNN, PYPL, PINS, and earnings insights.
The S&P 500 is currently overpriced, surpassing its historical valuations.
Investors should exercise caution with Pinterest's upcoming earnings report due to potential volatility.
Nike's stock has underperformed the market and caution is advised in the near term.
Deep dives
Market Valuations: S&P 500 PE Ratio Surpasses 20
According to a report by John Butters, the S&P 500's four 12-month PE ratio reached 20.1 on February 6, surpassing its five-year average of 18.9 and its 10-year average of 17.7. This indicates that the market is currently overpriced, even when considering the average valuations over the past 15 to 25 years.
Pinterest Earnings Preview: Watch Out for Downward Revisions
Pinterest is set to report its earnings, and investors should be cautious. Despite the recent stock rally, the implied move suggests a potential 14% swing in either direction. With earnings revisions typically trending downward and the market pricing in cuts in interest rates, the market remains expensive. Additionally, Pinterest's recent performance hasn't been stellar, adding to the need for caution.
Nike's stock has been lackluster and is currently trading below its long-term trend lines. It's important to note that this stock has been underperforming the broader market, particularly in the technology and consumer discretionary sectors which have higher PE ratios. While it may offer long-term potential, caution is advised in the near term.
PayPal's Guide Down Raises Concerns
PayPal recently guided down for the year, indicating potential challenges ahead. With a focus on ad support, PayPal's stock performance in the coming months could be affected by changes in consumer behavior and the ad market. Investors should remain attentive to these developments and manage their positions accordingly.
Market Insight: Valuations and Future Corrections
As overall market valuations continue to rise, it's important to remember that valuations often correct themselves over time. While it's difficult to predict the timing of such corrections, factors like earnings revisions and interest rates play a significant role. Understanding market valuations and staying informed is essential for navigating and managing investments effectively.