Markets
markets
Matt Phillips

Morgan Stanley: Don’t fight the rally, here’s why

Morgan Stanley’s chief US equity analyst, Mike Wilson, is out with a fresh note taking a look at one of his favorite fundamental indicators for the market.

It’s the bank’s somewhat idiosyncratic measure of analyst earnings expectations for S&P 500 (SPDR S&P 500 ETF) companies.

It’s a bit of a complicated, triple bank shot, meta-derivative he calls the “rate of change on earnings revisions breadth.” But for our purposes, just think about it as the short-term trend in the share of analysts who are lifting or lowering their expectations for S&P 500 earnings per share. Here it is:

Morgan Stanley S&P 500 earnings revisions breadth

Wilson wrote:

“Earnings revisions breadth troughed two weeks after Liberation Day and the beginning of the re-acceleration in this gauge coincided with Microsoft Q1 earnings release... In our experience, when revisions breadth is accelerating in a V-shaped manner from an extreme low, equity markets typically remain supported and pullbacks remain shallow and unsatisfying (like the past 6 weeks).”

In other words, while there’s still a lot of uncertainty out there about the longer-term impact of President Trump’s tariffs on the US economy and corporate profits, the markets are increasingly looking past it, setting the stage for better-than-expected earnings results in the coming quarters.

We’re seeing some of this dynamic play out today, as companies like Boeing, Carnival, and JPMorgan Chase are all seeing analysts pencil in higher full-year 2025 EPS expectations.

Such a trend helps explain the S&P 500’s roughly 20% rally off its April bottom for the blue chips, which pulled the market to within 2% of a new all-time high for stocks.

This driver explains why traders shouldn't fight the S&P 500 rally

This driver explains why traders shouldn't fight the S&P 500 rally

It’s a bit of a complicated, triple bank shot, meta-derivative he calls the “rate of change on earnings revisions breadth.” But for our purposes, just think about it as the short-term trend in the share of analysts who are lifting or lowering their expectations for S&P 500 earnings per share. Here it is:

Morgan Stanley S&P 500 earnings revisions breadth

Wilson wrote:

“Earnings revisions breadth troughed two weeks after Liberation Day and the beginning of the re-acceleration in this gauge coincided with Microsoft Q1 earnings release... In our experience, when revisions breadth is accelerating in a V-shaped manner from an extreme low, equity markets typically remain supported and pullbacks remain shallow and unsatisfying (like the past 6 weeks).”

In other words, while there’s still a lot of uncertainty out there about the longer-term impact of President Trump’s tariffs on the US economy and corporate profits, the markets are increasingly looking past it, setting the stage for better-than-expected earnings results in the coming quarters.

We’re seeing some of this dynamic play out today, as companies like Boeing, Carnival, and JPMorgan Chase are all seeing analysts pencil in higher full-year 2025 EPS expectations.

Such a trend helps explain the S&P 500’s roughly 20% rally off its April bottom for the blue chips, which pulled the market to within 2% of a new all-time high for stocks.

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The chip rally is getting so intense, even Qualcomm gets to surge

If you’re a good host, even the last person who shows up to the party gets to have a good time.

On that note, beleaguered Qualcomm — the worst-performing member of the Philadelphia Semiconductor Index this year — is staging a furious rally on Friday, with the industry poised to deliver its 18th consecutive session of gains.

Intel’s earnings are buoying the semi space broadly on Friday, and Qualcomm isn’t being left out. Options activity is also elevated and tilted toward the bull side. As of 9:56 a.m. ET, more than 48,000 calls have changed hands, roughly double its full-day average for the past 20 sessions. Its put/call ratio of 0.17 is well below the 20-day average of 0.44.

The San Diego-based firm has been negative in 2026 since the seventh session of the year, and even with today’s advance, remains mired in the red year to date. The stock cratered after reporting Q1 earnings in early February because its poor Q2 guidance seemingly confirmed fears that smartphone sales would come under pressure from rising memory chip prices and limited availability. Smartphone chips are still Qualcomm’s primary business, accounting for nearly two-thirds of revenues in its most recent quarter, and memory chip sellers appear to be incentivized to meet demand from major AI customers first.

Qualcomm reports Q2 earnings next Wednesday, but that release will likely be overshadowed by the four Magnificent 7 hyperscalers releasing results after the close.

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Matt Phillips

Analysts applaud Intel’s massive Q1

Intel’s massive Q1 numbers and mega Q2 guidance shocked Wall Street and sent shares across the semiconductor industry higher Friday morning.

Here’s how Wall Street analysts are characterizing the far better-than-expected results:

DA Davidson (rating: “neutral,” price target: $77): “Strong 1Q26 earnings that were highlighted by a significant beat on top and bottom-line expectations. Results in the quarter reflect the growing importance of CPUs and advanced packing. We view the recent Terafab announcement as a proof point that Intel is likely to see continued customer acquisition as the United States demands more domestic semiconductor manufacturing.”

Barclays (rating: “equal weight,” price target: $65): “The sizable top-line and gross margin beat caught us by surprise as our expectation was for tight supply in Q1. Mgmt expects the supply situation to improve through the year and for yields to improve, which should support growth in server.”

HSBC (rating: “buy,” price target: $100): “The market has been
underestimating Intel’s CPU average selling price upside as well as its ability to re-allocate its own foundry capacity to unlock further CPU unit growth, considering a CPU shortage environment that we expect to persist until 2027e.”

Bernstein: (rating: “market perform,” price target: $65): “Server strength seems demonstrably real, client seems to be holding up for now, commentary around 18A/14A was positive, and there remains hopes for forthcoming packaging announcements. That being said, there were quite a few nuggets for the bears as well; namely while 18A yields are seemingly running better than expected they apparently remain underwhelming, and ASP increases are being met by cost inflation.”

JPMorgan (rating: “underweight,” price target: $45): “EPS quality issues, 2H gross margin headwinds, structural OpEx creep, and a Foundry breakeven timeline that is likely to push beyond YE CY27 keep us at UW even as we raise estimates.”

Intel crushes Q1 earnings expectations, forecasts strong Q2 revenue, shares soar

Intel crushes Q1 earnings expectations, forecasts strong Q2 revenue, shares soar

DA Davidson (rating: “neutral,” price target: $77): “Strong 1Q26 earnings that were highlighted by a significant beat on top and bottom-line expectations. Results in the quarter reflect the growing importance of CPUs and advanced packing. We view the recent Terafab announcement as a proof point that Intel is likely to see continued customer acquisition as the United States demands more domestic semiconductor manufacturing.”

Barclays (rating: “equal weight,” price target: $65): “The sizable top-line and gross margin beat caught us by surprise as our expectation was for tight supply in Q1. Mgmt expects the supply situation to improve through the year and for yields to improve, which should support growth in server.”

HSBC (rating: “buy,” price target: $100): “The market has been
underestimating Intel’s CPU average selling price upside as well as its ability to re-allocate its own foundry capacity to unlock further CPU unit growth, considering a CPU shortage environment that we expect to persist until 2027e.”

Bernstein: (rating: “market perform,” price target: $65): “Server strength seems demonstrably real, client seems to be holding up for now, commentary around 18A/14A was positive, and there remains hopes for forthcoming packaging announcements. That being said, there were quite a few nuggets for the bears as well; namely while 18A yields are seemingly running better than expected they apparently remain underwhelming, and ASP increases are being met by cost inflation.”

JPMorgan (rating: “underweight,” price target: $45): “EPS quality issues, 2H gross margin headwinds, structural OpEx creep, and a Foundry breakeven timeline that is likely to push beyond YE CY27 keep us at UW even as we raise estimates.”

Hundreds of advocates for marijuana legalization rally and smoke pot outside the White House.

It seems like the US weed industry finally got what it wanted. Why did pot stocks plunge?

The DOJ’s order to reclassify marijuana could be a boon for US cannabis companies. But the devil is in the details.

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Claire Yubin Oh

TSMC surges as Taiwan eases single-stock investment limits for funds

TSMC’s ADRs jumped 3% in premarket trading on Friday after the island’s financial regulator announced plans to ease limits on funds’ allocations to single funds.

Previously, active fund managers were limited to allocating up to a maximum of 10% of their net assets into any one company. Under the revised framework, local equity funds and active exchange-traded funds that solely invest in Taiwanese stocks can allocate up to 25% of their assets in any listed company if it has a weighting above 10% in the Taiwan Stock Exchange.

The new rule, announced Thursday, will come into effect after the regulator issues an order on Friday. Relaxing the long-standing rule will mean fewer restrictions on local money managers taking full advantage of TSMC’s skyrocketing share price. TSMC, now Asia’s largest company by market cap, has seen its share price surge 150% in the past year — adding more to its gains in the last few days after crushing estimates in its first-quarter results.

TSMC is currently the only company that meets that 10% criterion, holding some 44% weight in Taiwan’s benchmark index, though the latest change also moved other large-cap Taiwanese stocks higher on Friday.

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