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Stocks head for another potentially dangerous week, after the S&P 500 slips into bear market territory


Traders work on the floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., March 7, 2022.

Andrew Kelly | Reuters

If there’s more bad news from retailers next week, it could be a negative catalyst for an already tough stock market.

Market experts are watching for more signs that the stock could bottom, though strategists say it’s a tough prospect and possibly false positives. The S&P 500on an intraday basis, fell into a bear market for the first time on Friday – trading 20% ​​below the record high hit in January.

“It’s been a process,” said Julian Emanuel, head of equities, derivatives and quantitative strategy at Evercore ISI. Emanuel said that the removal of the lows could be a buying opportunity, but the market could also go lower. “Looking to the medium and long term, towards the end of the year, we continue to see higher stock prices ahead.”

The S&P 500 also fell below a record closing high of 3,837.24. If the benchmark closes below that level, Wall Street experts will consider it in a bear market.

While there is no official decision on what a bear market is, traders look to that 20% mark as a way to give context to the stock market drop. But they say the extent of the bear market, or how far stocks can fall, depends closely on the performance of the economy.

“The whole thing depends on whether there is a recession or not. In the last three bear markets where there was no recession, the drop was 21.3% and there we are basically there. “, said Emanuel.

In the last three bear markets where there was a recession, the average drop was 47.9%, he said. Those bear markets were in 2000, 2008 and 2020. Evercore doesn’t expect a recession, but its clients now see a 55% chance of it happening over the next 18 months, Emanuel said.

Stocks have fallen sharply over the past week, despite the fact, strategists had expected the oversold market to recover. The market initially rallies, until the earnings are zero Walmart and Target inflate profits.

The surprising weakness of those two solidly large retailers has crushed their shares, affecting the retail sector and down the whole market above fear that consumers are shaking and other companies will also have income problems.

Income from Costco, Best buy and other data, as well as personal consumption spending data, could be very important next week as investors weigh the level of consumer distress. PCE includes data on spending, income, and inflation.

“Any retailers reporting in this environment is cause for fear, based on what we’ve seen this week,” Emanuel said.

Other retailers reporting earnings next week include Ulta Beauty, Macy’s, Dick’s sportswearand discount Dollar tree and Common Dollar. Their reports and comments can help clarify whether consumers are weakening more broadly, and inflation and supply chain troubles continue to hurt stores and how the economy.

The reports from Walmart and Target come as the market is also assessing a April retail sales report, shows that spending has increased by 8.2% year-on-year.

For the next week, the economic calendar includes the Federal Reserve’s minutes from its last meeting on Wednesday, a second review of first-quarter gross domestic product on Thursday, as well as PCE data on Monday. Friday. PCE data also includes the PCE inflation index, which is closely watched by the Fed.

“We’re likely to shift our focus to economic data,” said Art Hogan, market strategist at National Securities. improve. One thing is consistent, the data and the economic calendar outperform the market’s reaction to it.”

Shares have fallen over the past week, with the S&P 500 index falling 4.5% on Friday afternoon. The Nasdaq was even bloodier, falling 5.6% as some big-cap tech favorites. Apple is down more than 8% for the week and Tesla is down more than 15.6%.

Strategists are watching to see if the S&P 500 can hold onto last week’s low of 3,859. It initially held that sixth level, but then surpassed it and plummeted.

“This is the point where you can go short and lose money, and you can get bottomed and it just doesn’t work,” said Scott Redler, partner at T3Live.com.

“I’ve put in extra money to work long-term, and I won’t do any more unless we go to a lower position,” said Redler. “As a trader, there are potholes everywhere. It’s hard to get excited here with two more Fed rate hikes, and the only reason the Fed is off course is if the stock market reals. influence.”

The Fed raised interest rates by half a percent this month, and many expect two more 50-basis-point hikes before returning to the quarter move. The basis point is 0.01.

Emanuel said investors should stay on the defensive. “This is an environment where you have to look at all the sides that you can,” he said. When a stock has a high short position, meaning that investors expect the price to fall, any move in the price higher could force those investors to sell short, pushing the stock price even higher. even better growth.

Emanuel said he also likes valuable names. “In the long term, that is a very viable area of ​​the market,” he said. Emanuel added that value stocks are owned by individuals, and he says they are a hedge in an environment of rising rates and also against inflation.

Week-by-week calendar

Second

Income: Video ZoomAdvanced auto parts

12:00pm Atlanta Fed President Raphael Bostic

Tuesday

Income: auto zone, Nordstrom, Best buy, Abercrombie and Fitch, Ralph LaurenPetco, Agilent, Brothers collect fees, NetEase

9:45 am Manufacturing PMI

9:45 am Services PMI

10:00 am New home for sale

Wednesday

Income: Nvidia, Dick’s sportswearCourier, Bank of Montreal, Box, Nutanix

8:30 a.m. Durable goods

2:00pm FOMC

Thursday

Income: Costco, Macy’s, Autodesk, Gap, Dell Technology, Dollar Tree, Dollar General, Ulta Beauty, Lion Gate, VMware, Baidu, AlibabaMedtronic, Burlington StoreAmerican Eagle Outfitters, Toronto Dominion, Jack in the Box, Lock up, Working day, Sumo Logic

8:30 a.m. Unemployment claims

8:30 a.m. Real GDP (second quarter estimate)

10:00 am Home sale pending

Friday

Income: Canopy growth, Big number

8:30 a.m. Previous economic indicators

8:30 a.m. Wholesale inventory

8:30 a.m. Personal income/expenditure

8:30 am PCE deflator

10:00 am University of Michigan Consumer Psychology



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