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Many on Wall Street remain convinced that a widely expected recession is likely to roil markets once again sometime this year. Also encouraging for investors was Powell's repeated references to disinflation - a falling rate of inflation. "I think they do see a path where you can get that soft landing, that Goldilocks-type scenario play out," he said. Banks and asset managers that have reiterated recession calls in recent weeks include BlackRock, Wells Fargo and Neuberger Berman. "Do people think (rate cuts) will be in response to inflation that has been coming down or something more dramatic, in terms of economic slowdown?
The heavyweight tech sector (.SPLRCT) dropped 1.9% while energy (.SPNY) shed 2.3%, the biggest drop among the S&P 500 sectors. More than 100 S&P 500 companies are expected to report results this week, which also includes central bank meetings in the United States and Europe and closely watched U.S. employment data. Despite Monday's declines, the S&P 500 remained on track to post its biggest January gain since 2019. With more than 140 companies having reported so far, S&P 500 earnings are expected to have fallen 3% in the fourth quarter compared with the prior-year period, according to Refinitiv IBES. The S&P 500 posted 5 new 52-week highs and no new lows; the Nasdaq Composite recorded 67 new highs and 20 new lows.
Investors widely expect the Federal Reserve will raise rates by 25 basis points (bps) on Wednesday, with announcements on Thursday from the Bank of England and European Central Bank (ECB), both of which are largely expected to hike by 50 bps. The U.S. corporate earnings season also rolls on, with earnings this week expected from Apple (AAPL.O), Alphabet (GOOGL.O) and Amazon (AMZN.O). The pan-European STOXX 600 index (.STOXX) lost 0.17% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) shed 0.99%. U.S. Treasury yields rose ahead of the central bank meetings and economic data, with the 10-year yield up for a third consecutive session. Crude prices fell ahead of the expected hikes by central banks and signals of strong Russian exports.
More than 100 S&P 500 companies are expected to report results this week, which also includes central bank meetings in the United States and Europe and closely watched U.S. employment data. Despite Monday's declines, the S&P 500 was on track to post its biggest January gain since 2019. Meanwhile, the European Central Bank is expected to deliver another large rate hike on Thursday. With more than 140 companies having reported so far, S&P 500 earnings are expected to have fallen 3% in the fourth quarter compared with the prior-year period, according to Refinitiv IBES. The S&P 500 posted five new 52-week highs and no new lows; the Nasdaq Composite recorded 51 new highs and 14 new lows.
The S&P 500 energy sector (.SPNY) is up 4.2% year-to-date, slightly lagging the rise for the broader index (.SPX). Goldman Sachs, RBC Capital Markets and UBS Global Wealth Management are among the Wall Street firms recommending energy stocks. He said he is slightly overweight the energy sector, including shares of Chevron and Pioneer Natural Resources (PXD.N). But earnings are expected to decline 15% this year, the biggest drop among the 11 S&P 500 sectors. Energy companies executed $22 billion in share buybacks in the third quarter, just over 10% of all S&P 500 buybacks.
The S&P 500 energy sector (.SPNY) is up 4.2% year-to-date, slightly lagging the rise for the broader index (.SPX). Goldman Sachs, RBC Capital Markets and UBS Global Wealth Management are among the Wall Street firms recommending energy stocks. He said he is slightly overweight the energy sector, including shares of Chevron and Pioneer Natural Resources (PXD.N). But earnings are expected to decline 15% this year, the biggest drop among the 11 S&P 500 sectors. Energy companies executed $22 billion in share buybacks in the third quarter, just over 10% of all S&P 500 buybacks.
Take Five: Goldilocks and the three bears
  + stars: | 2023-01-27 | by ( ) www.reuters.com   time to read: +5 min
Will the Federal Reserve tone down its hawkish rhetoric in the face of cooling inflation or stick to its guns? Investors widely expect a 25-basis point rate increase at the Feb. 1 meeting and for rates to stop short of hitting 5%. Fed officials, however, have indicated they expect the key policy rate to top out at 5.00-5.25% this year. Dollar bears, meanwhile, will watch for dovish leanings that could further accelerate a decline in the greenback. Amundi reckons ECB rates could reach 4%.
Take Five: Staring at the ceiling
  + stars: | 2023-01-23 | by ( ) www.reuters.com   time to read: +5 min
All told, companies worth more than half the S&P 500's market value are reporting results over the next two weeks. Stock markets can predict the global PMI levels, tending to bounce ahead of a sustainable rise of the index. On Wednesday, watch out for Australian and New Zealand inflation data as well, with the RBNZ pondering how much more to tighten, and the RBA wondering whether it's time to pause. Reuters Graphics5/LONDON CALLINGLondon's bluechip FTSE 100 index (.FTSE) is poised to launch a new attempt to scale an all-time high in days to come. British public sector borrowing numbers, producer price inflation and PMI data are all due as well ahead of a Bank of England meeting the following week.
The tech-heavy Nasdaq 100 index (.NDX) has gained over 3% in 2023, double the rise for the S&P 500 (.SPX). The Nasdaq 100 fell 33% in 2022, while the S&P 500 lost 19.4%. Apple, the largest U.S. company by market value, and Google-parent Alphabet report the following week. Fourth-quarter earnings in the tech sector are expected to have declined 9.1% from a year ago, compared to a 2.8% decline for S&P 500 earnings overall, according to Refinitiv IBES. The S&P 500 tech sector still trades at a roughly 19% premium to the broader index, above its 7% average of the past 10 years, according to Refinitiv Datastream.
Europe's STOXX 600 index (.STOXX) has gained some 17% since the end of the third quarter, versus 11% for the U.S. benchmark S&P 500. MSCI's gauge of global stocks excluding the U.S. has risen more than 20% over that time. The firm last month rotated more into international equities as it increased its overall stock exposure, de Longis said. US vs European stock performanceInternational stocks were recently touted by investor Jeffrey Gundlach of DoubleLine Capital and BofA Global Research, which projected global stocks would "crush" their U.S peers in 2023. Buying international stocks could be a "complement" to the opportunity domestically, said Mona Mahajan, senior investment strategist at Edward Jones.
They projected their key policy rate would top out at between 5.00% and 5.25% this year, up from a current 4.25%-4.50% rate. Market pricing indicates investors remain wedded to a more dovish view, with the policy rate peaking below 5% around mid-June before falling in the second half of the year. Rieder believes policymakers will raise rates by 25 basis points at the next two meetings, with further 25 basis point increases possible, depending on data. Investors in short-term options had priced in a much sharper move of about 2% going into Thursday's CPI print, according to data from market maker Optiver. Tiffany Wilding, PIMCO's North American economist, believes the Fed is likely to raise rates just two more times this year before pausing.
"I think that this is going to be the most contentious debt ceiling debate in memory," Winograd said. "It would suggest that there's some type of premium being allocated to bills in that space where the risk of the debt ceiling starts to grow," Norris said. Some investors also believe lawmakers will be able to reach a deal on raising the debt ceiling without severely unsettling markets. Edward Al Hussainy, senior interest rate and currency analyst at Columbia Threadneedle, thinks any debt ceiling tensions would eventually be resolved, calling the issue "a well rehearsed storyline." However, the heightened concerns about the debt ceiling are "an extra little justification on top" for the firm's positioning, Pride said.
The S&P 500 tumbled 19.4% in 2022, as the Federal Reserve's aggressive rate hikes designed to tamp down 40-year high inflation punished asset prices. The market's 2022 slide cut the ratio of price to forward earnings estimates to around 17 from about 21.7 a year ago, according to Refinitiv Datastream. S&P 500 forward price-to-earnings ratio over timeValuations may still be too high if a recession comes to pass, as many on Wall Street expect. Combined with an expectation of weakening earnings estimates, that would lower the S&P 500 to 3,200, UBS said, roughly 16% below current levels. The 2022 surge in interest rates also could undermine stock valuations by making relatively safe assets like U.S. Treasuries more attractive alternatives.
Take Five: Welcome to 2023
  + stars: | 2023-01-06 | by ( ) www.reuters.com   time to read: +5 min
LONDON, Jan 6 (Reuters) - A potential shift by the world's most dovish major central bank, inflation pressures abating, a turn in the economic outlook and oil markets suffering their biggest tumble in decades: Welcome to 2023! 1/ EARNINGS AND INFLATIONThe week ahead brings a critical read into two key themes for Wall Street in 2023: the health of corporate profits and inflation. With crude oil volatility soaring, 2023 might be anything but plain sailing for producers and consumers alike. Barclays expects the UK economy to keep contracting until the end of the third quarter of 2023. It takes time for declines in market prices to filter through into household bills, but signs are positive for cash-strapped consumers and businesses.
The S&P 500 (.SPX) is down nearly 20% year-to-date with only a few trading days left in 2022, on pace for its biggest calendar-year drop since 2008. S&P 500 timeline in 2022Inflation, and the Fed's degree of aggressiveness in trying to contain it, will likely remain a critical factor driving equity performance as 2023 gets under way. Recessions tend to hit stocks hard, with the S&P 500 falling an average of 29% during recessions since World War Two, according to Truist Advisory Services. Investors are also concerned that corporate earnings estimates may not have fully factored in a potential slowdown, leaving more downside for stocks. Consensus analyst estimates project S&P 500 earnings to rise 4.4% in 2023, according to Refinitiv IBES.
"The issue is how much has the market already discounted a recession, and that’s where it gets a little bit thornier." Concerns that the Fed will maintain its hawkish stance helped drive the S&P 500 down 1.45% on Thursday. The S&P 500 marked a 2022 closing low of 3,577.03 in October, just over 6% below its current level. Yet earnings fall by an average annual rate of 24% during recessions, according to Clissold, leaving plenty of downside for profits if a slowdown hits. Bear markets on average have bottomed four months before the end of a recession, according to Clissold, of Ned Davis.
The S&P 500 banks index (.SPXBK) has slumped some 11% this month against a 5.5% drop for the broader index (.SPX) in the same period. While bank stocks have traded broadly in line with the S&P 500 throughout the year, their decline accelerated in recent weeks, with the S&P 500 bank index now off over 24% in 2022. The S&P 500 is down 19% year-to-date, on pace for its biggest annual percentage drop since 2008. Expectations of a slowdown led Todd's firm to sell some of its bank shares earlier this year. King Lip, chief strategist at Baker Avenue Wealth Management, said his firm recently bought bank stocks, convinced that any hit to U.S. growth will likely be moderate.
Take Five: Keeping the lights on
  + stars: | 2022-12-16 | by ( ) www.reuters.com   time to read: +5 min
1/PICKING A (JAPANESE) PIVOTEven the uber-dovish Bank of Japan has not been spared from investors trying to pick central bank pivot points. France is striving to avert power cuts, and Germany is bleeding cash to keep the lights on. Thursday has meetings scheduled for Indonesia - where the central bank has just seen growth added to its mandate - as well as Egypt, which is in line for support from the International Monetary Fund. Expectations of a softer dollar as the U.S. economy slows have sparked optimism about emerging markets, which should also benefit from China easing COVID-19 restrictions. Emerging markets interest ratesCompiled by Karin Strohecker, Graphics by Sumanta Sen and Vincent Flasseur, editing by Barbara LewisOur Standards: The Thomson Reuters Trust Principles.
The index has bounced about 10% from its October lows but remains down more than 17% on the year. Equities’ trajectory in the near future may depend on whether Tuesday’s consumer price index report shows inflation is responding to the most aggressive Fed hiking cycle since the 1980s. Hotter-than-expected data could bolster fears of more Fed hawkishness, pressuring stocks. A second helping of benign data could bolster the case for a peak in inflation and buoy equities further. Reuters GraphicsMeanwhile, investors are factoring in a half-percentage-point rate hike from the Fed next week, a step down from its recent series of three-quarter-point increases.
Take Five: The grand 2022 central bank finale
  + stars: | 2022-12-09 | by ( ) www.reuters.com   time to read: +5 min
1/TWICE THE FUNInvestors will be fed a huge helping of year-end U.S. news when Tuesday's release of November consumer inflation data is followed by the Federal Reserve's last rate decision of 2022 on Wednesday. Reuters Graphics2/ SUPER THURSDAYIt's super Thursday in Europe, where central banks in the euro area, Britain, Switzerland and Norway all meet. The pace of aggressive rate hikes from big central banks is slowing but the fight against inflation is not over yet. Surging energy and food costs propelled consumer price inflation to a 41-year high of 11.1% in the year to October. Wednesday's UK inflation data may hint at price rises having peaked, following trends in the eurozone and the U.S.
The Dow Jones Industrial Average (.DJI) rose 199.37 points, or 0.59%, to 33,745.69, the S&P 500 (.SPX) gained 18.78 points, or 0.48%, to 3,965.34 and the Nasdaq Composite (.IXIC) added 1.11 points, or 0.01%, to 11,146.06. For the week, the S&P 500 fell 0.7%, retreating modestly after a strong month-long rally spurred by softer-than-expected inflation data that sparked hopes the central bank could temper its market-punishing rate hikes. "We are not likely to see any real evidence in terms of potentially declining wage pressure or inflation pressure for another couple of weeks.”Defensive groups led the way among S&P 500 sectors, with utilities (.SPLRCU) up 2%, real estate (.SPLRCR) rising 1.3% and healthcare (.SPXHC) 1.2% higher. The S&P 500 posted 8 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 62 new highs and 141 new lows. About 9.7 billion shares changed hands in U.S. exchanges, compared with the 12 billion daily average over the last 20 sessions.
The S&P 500 has retreated this week after a month-long rally following softer-than-expected inflation data that sparked hopes the central bank could temper its market-punishing rate hikes. “What is driving all equities of course is Fed policy and the gravitational force that rising interest rates have on the equity complex as a whole," Goodwin said. Energy fell 1.7%, most among S&P 500 sectors, as oil prices dropped, stemming from concern about weakened demand in China and further increases to U.S. interest rates. Gap Inc (GPS.N) shares rose about 5% after the company beat Wall Street estimates for quarterly sales and profit. The S&P 500 posted 7 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 49 new highs and 112 new lows.
Take Five: Black Friday test
  + stars: | 2022-11-18 | by ( ) www.reuters.com   time to read: +5 min
1/GOING SHOPPINGWith concerns that the U.S. economy may be on the verge of a recession, a key test of consumer demand arrives on Nov. 25, when retailers launch "Black Friday" sales - a day traditionally marked by long lines of shoppers eager to pounce on discounts. Soaring inflation and surging interest rates could test buying appetite. The dollar index, meanwhile, peaked at a 20-year high of 114.78 in September and has been falling ever since. Reuters Graphics3/BLEAK OUT THEREThe International Monetary Fund says the global economic outlook is even gloomier than it was a month ago. Preliminary readings of business activity in November from a number of economies could answer the question in the coming days.
Shares of Target Corp (TGT.N) tumbled 13.1% after the big-box retailer forecast a surprise drop in holiday-quarter sales. The S&P 500 consumer discretionary sector (.SPLRCD) shed 1.5%. The S&P 500 information technology sector (.SPLRCT) fell 1.4% and the Philadelphia SE Semiconductor index (.SOX) sank 4.3%. Elsewhere in retail, shares of Lowe's (LOW.N) rose 3% after the home improvement company raised its annual profit forecast. The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 71 new highs and 133 new lows.
Shares of Target Corp (TGT.N) tumbled 12% after the big-box retailer forecast a surprise drop in holiday-quarter sales. Micron Technology (MU.O) shares dropped over 7% after the company said it would reduce memory chip supply and make more cuts to its capital spending plan. The S&P 500 information technology sector (.SPLRCT) dropped 1.3%, while the Philadelphia SE Semiconductor index (.SOX) sank over 4%. Elsewhere in retail, shares of Lowe's (LOW.N) rose over 3% after the home improvement company raised its annual profit forecast. The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 54 new highs and 110 new lows.
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