Last week’s crash wiped about $3 trillion off the combined market value of S&P 500 companies in a single session, but Morgan Stanley’s Mike Wilson believes the market correction is much closer to the end than the beginning.
Market Has Done ‘Most of the Work‘
Wilson, the bank’s chief investment officer and chief U.S. equity strategist, said on the ‘Thoughts on the Market’ podcast Monday that investors spent months selling ahead of the midterms and the market “has already done most of the work.”
By the bank’s count, the S&P 500 has moved toward the 7,100 to 7,300 support range it identified in August, and semiconductors are down roughly 40% from their June highs.
He said the correction “looks much closer to the end than the beginning,” though he would not be surprised by one more test of last week’s lows, “perhaps even a break on lower momentum.”
Wilson said that his “preference is to use weakness over the next few weeks to begin adding risk,” particularly in quality cyclicals such as industrials.
“This is not the moment to get bearish,” he added.
Selective on Chip Stocks
The midterms removed some uncertainty around the AI buildout, Wilson said, as Morgan Stanley’s capital expenditure mapping puts 2027 data center spending at about 5% of consensus S&P 500 revenue, so any delays should be “manageable” for earnings.
U.S. data center construction spending rose 90% in September from a year earlier to a record annualized $96.5 billion, according to the Kobeissi Letter.
Wilson called AI adoption “one of my highest conviction themes into 2027,” though he remains selective on chip stocks.
A more hawkish Federal Reserve could stretch the bottoming process into December, he added. CME Group’s FedWatch tool shows an 84% chance of a rate hike at the meeting.
Selloff Followed Post-Election Rally
Wall Street’s post-election rally on Wednesday gave way to a sharp selloff Thursday as investors reassessed the outlook for AI infrastructure spending and the potential impact of Democratic control of Congress.
Chip stocks, including Micron Technology Inc. (NASDAQ:MU), Nvidia Corp. (NASDAQ:NVDA), Marvell Technology Inc. (NASDAQ:MRVL) and Advanced Micro Devices Inc. (NASDAQ:AMD), tumbled in the rout.
Several chip stocks bounced back Monday, led by AMD, which closed more than 13% higher, while Marvell gained nearly 10% and Micron rose 6%.
However, Nvidia remains nearly 11% below its Wednesday close, while its board conducts an independent investigation into CEO Jensen Huang relationship with an alleged Chinese spy.
Price Action: The State Street SPDR S&P 500 ETF Trust (NYSE:SPY) rose 2.37% to close at $752.69 on Monday and gained 0.22% to $754.31 in overnight trading, while the Invesco QQQ Trust (NASDAQ:QQQ) rose 3.54% to close at $679.35, while it fell 0.09% to $678.75 in overnight hours.
Benzinga Edge rankings indicate the State Street ETF has a Momentum score in the 56th percentile, with a negative price trend in the short and Medium term. Over the long term, the stock has a positive trend.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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