This edition of Market Factors starts with a stock screen and a bullish rationale I found compelling. Another hugely bullish report on SpaceX is next and we discuss the death of reading in the diversion. Quick hits has brief notes on ‘dark-crossing’ in the Strait of Hormuz, China and a battered loonie.
Equities
Beaten-down, promising stock opportunities
Evercore ISI strategist Julian Emanuel quoted Jaws - “we’re going to need a bigger boat” - to underscore his belief that the S&P 500 rally is set to both broaden and accelerate. He designed a novel stock screen he calls “Beaten down beat and raisers” to fully profit from his forecast.
Mr. Emanuel believes corporate earnings are strong enough to push the S&P 500 to his year-end target of 7,750 (it was trading at 7,558 as of midday Wednesday). Continued AI-related spending and lessening fears about triple-digit oil prices are the main catalysts. Evercore as a firm believes second quarter profit growth will exceed consensus by seven percentage points, in line with recovery periods from recessions.
Consistent with the earnings recovery theme, Mr. Emanuel believes underperforming stocks with elevated short interest but strong earnings expectations are set to lead the market. Conversely, stocks currently outperforming but with weaker earnings revisions will underperform.
The strategist believes the volatility in technology stocks is a run of the mill pullback within a larger rally. Hyperscaler spending expectations - 74 per cent growth this year and another 22 per cent in 2027 - will be enough to support higher stock prices.
He also notes that a healthy “wall of worry”, a degree of skepticism that protects against bubble building, has been rebuilding. Short interest in Nvidia Corp. and the Nasdaq index have climbed to multi-year highs. Shorting of rally leading favourites has not historically accompanied tech stock peaks. The potential for short covering is an under-appreciated potential catalyst, according to Evercore.
Mr. Emanuel’s stock screen looks for stocks underperforming versus their sector, with most positive earnings revisions than the sector, with a history of beating consensus on both sales and profits, and where short interest is near the two-year average.
The list of stocks identified by the screen is less tech-heavy than I expected. The top five in order of market cap are Nvidia Corp., Alphabet Inc., Netflix Inc., Intuitive Surgical Inc. (a company that has gotten shockingly enormous) and Booking Holdings Inc. The next five are also a mixed bag sector-wise - Stryker Corp., ADP Inc., Moody’s Corp., Cintas Corp. and Regeneron Pharmaceuticals.
Stocks on the remainder of the list that might interest Canadian investors include Nasdaq Inc., Churchill Downs Inc., and Paychex Inc.
Like many investors, I’ve been concerned that the U.S. rally, particularly AI-related technology, had gone too far. Emanuel’s emphasis on continued capital expenditure, short positions and earnings expectations have gone a long way in dragging me back to at least a neutral stance.
A sign displays outside Nasdaq on the day of SpaceX's initial public offering (IPO) in New York City, U.S., June 12, 2026.Jeenah Moon/Reuters
IPOs
You thought BofA was bullish on SpaceX?
I featured a bullish outlook on SpaceX from BofA Securities Monday despite the stock’s recent southerly direction. Morgan Stanley’s global director of research Katy Huberty is marketing a report from their analyst that is even more bullish.
Ms. Huberty, like BofA’s head of research Candace Browning-Platt, features research reports for extra attention every week. Both pointed to SpaceX reports - in Morgan Stanely’s case a new US$300 target price and overweight rating from analyst Adam Jonas.
Mr. Jonas expects revenue to climb from US$45-billion in 2026 to US$319-billion in 2030 and a mammoth US$3.3-trillion in 2040. He cited Starlink revenue, and AI revenue (from orbiting data centres), as main drivers. Planned flights for the heavy payload program Starship was cited as a stock price catalyst.
Those are huge growth numbers for sales growth. Scarcely believable even.
JOEL SAGET/AFP/Getty Images
Diversions
Reading is over
I listen to podcasts while I work to shut out distractions and The Ringer network includes a number of my favourites. The Ringer boss himself, Bill Simmons, had author Chuck Klosterman as a guest recently and the latter uttered a sentence I will likely be thinking about for the rest of my life.
Mr. Klosterman said, “The scary thing … is that it is possible that maybe books are not the most effective way to learn things.” Umm, what?
The comment comes on the heels of an Atlantic feature The End of Reading is Here by Rose Horowitch. Survey data in the column clearly indicate a decline in reading. The U.S. National Endowment for the Arts found that Americans reading for pleasure on any day - books, magazines, newspapers, even audiobooks were included - have declined from 28 per cent in 2004 to 16 per cent now.
The decline in reading was found among all age groups, genders and education levels. Reading skills in fourth and eighth grades have been falling rapidly for the past decade. Studies found that 30 per cent of Americans were unable to paraphrase from multipage texts. Gambling is now a more popular pastime than reading.
Ms. Horowitch describes America as postliterate and this likely extends to Canada, or will soon. We still see a lot of words, in texts and on social media, just not long sentences and without the need to focus intently for extended periods of time on one subject or story.
Learning without books, as Mr. Klosterman assumes, will lead to a different type of student and big changes in society as a whole. Not worse, necessarily, just different.
Those of us who grew up as readers before the advent of social media and streaming will be horrified by much of the Atlantic article - the student who used ChatGPT to translate Anthony Burgess’s Clockwork Orange from what they called old English hit me particularly hard - but maybe we’ll have to let that go. Technology is changing the world and this is just one more thing we’ll have to roll with.
The essentials
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Globe Investor highlights
Tim Shufelt on how IBM’s plunge Tuesday exposes a new economic fault line
The New York Times on how it’s actually China that may decide whether oil prices soar from here
Jamie McGeever notes that AI uncertainty is rising. Problem is, so is investor conviction
Quick hits
Goldman Sachs oil market specialist Yulia Zhestkova Grigsby described the interesting phenomenon of oil tanker “dark crossing” in the Strait of Hormuz in a Tuesday report. Apparently oil tankers are turning off their transponders and crossing the Strait, making them untraceable, and then turning them back on once through disputed water. Thus oil supply is less constrained than official stats indicate.
Scotiabank currency analyst Shaun Osborne noted that the Canadian dollar is the most shorted major currency. The net short position in currency derivatives moved to US$12.2-billion, as of July 7, which is larger than the 2025 low and approaching the record short levels hit in 2024. This is no doubt because of central bank policy as the Bank of Canada is on hold, which implies stable short-term bond yields, and the Federal Reserve is more likely to hike, pushing U.S. Treasury yields higher.
There was a time not so long ago that disappointing Chinese economic data would send commodity prices into a tailspin. Now, the weaker-than-expected GDP growth result for the second quarter - 4.3 per cent versus 4.5 per cent forecasted - barely causes a ripple. Capacity utilization, an important measure in an economy prone to oversupply, fell to the lowest level in five years at 73.0 per cent.
Read this week’s earnings and economic calendar here