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☆ Markets are ignoring recession signals because a downturn might actually ease a handful of problems facing stocks
  + stars: | 2023-04-24 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +4 min
Today we're diving into how a recession could affect the stock market — and why it may not be all bad in the eyes of investors. Traders gather on the floor of the New York Stock Exchange, Friday, March 18, 2016. Markets so far this year haven't acted like they're too concerned about a recession, and that's no accident, according to DataTrek Research. : Sticky, high prices have weighed on stocks, but a slowdown would alleviate this. Falling productivity in the labor market: A recession could stop companies from hoarding workers, which could improve profit margins.
☆ Why markets actually could be hoping for a recession this year
  + stars: | 2023-04-21 | by ( Jeff Cox | ) www.cnbc.com   time to read: +3 min
Markets are not only acting unafraid of a looming recession but also may actually want one that would eradicate some of the other ills facing the U.S. economy, according to one Wall Street analysis. Wall Street economists and strategists widely expect a recession to set in later this year, the product of a number of factors. "Stocks bottom before the US economy hits its lows in any given recession because markets understand this dynamic," Colas wrote. "Markets know this history, which is why they see an upcoming recession as finally bringing the Fed around to starting the next easing cycle," Colas said. "There are other pathways to achieve those necessary goals, but none will work as quickly as an economic contraction.
☆ With the banking crisis on hold, the Fed is back to fighting inflation
  + stars: | 2023-04-20 | by ( Jeff Cox | ) www.cnbc.com   time to read: +6 min
The Federal Reserve's policy pendulum has swung back to inflation fighting. "The view is based on banking sector stress remaining contained, the economic expansion continuing and core inflation remaining stubbornly high." A cooling crisis Indeed, Fed Chairman Jerome Powell and other central bankers in late February and early March were indicating chances of half-point rate hikes . Watching the banks, and the market To be sure, the banking situation remains in flux and could yet shape Fed policy. At the same time, the two-year Treasury note yield, which is most sensitive to Fed policy moves, has jumped about half a percentage point over the past two weeks.
☆ The US dollar's recent slide is flashing a bullish signal for markets
  + stars: | 2023-04-14 | by ( Filip De Mott | ) www.businessinsider.com   time to read: +2 min
The US dollar's recent decline is a bullish signal for global markets, DataTrek reports. Since its September peak, the US Dollar Index has fallen by 11.3%. "A weaker dollar at this point in the global economic cycle is both consistent with the past and a generally bullish sign about the future," he wrote. It is, however, how markets signal better times to come." Historically, the US Dollar Index, which compares the greenback's strength to a basket of currencies, spikes in moments of economic crises, such as in 2009 and 2022.
☆ March CPI and the Fed's next steps in its inflation battle: Everything to know
  + stars: | 2023-04-12 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +5 min
Phil Rosen here — March's inflation report is due at 8:30 a.m. "Super core inflation in the CPI report has shown no signs of abating yet," he wrote in a note. Below, I'm breaking down how the world's largest asset manager expects the inflation story to pan out in the long-run. But BlackRock isn't convinced that strength can continue. These three under-the-radar signals suggest that a US recession isn't as close as you might think.
☆ US stocks trade mixed as investors await big inflation report
  + stars: | 2023-04-11 | by ( Matthew Fox | ) www.businessinsider.com   time to read: +1 min
US stocks were mixed on Tuesday as investors prepared for the March consumer price index. The inflation report should give investors a better idea if the Fed will hike interest rates again. Also on investors' radar is the upcoming first-quarter earnings season, which the banks kick off on Friday. The inflation report should give investors a better idea if the Federal Reserve will hike interest rates again at its May FOMC meeting. Investors are also preparing for the first-quarter earnings season, which starts with mega-cap banks JPMorgan and Wells Fargo Friday morning.
☆ 3 signals that show a US recession is farther away than most investors think
  + stars: | 2023-04-11 | by ( Matthew Fox | ) www.businessinsider.com   time to read: +4 min
Recent economic data suggests a US recession is farther away than most investors think. A rebound in gasoline demand and calmness in the bond market are sending bullish signals about the economy. Gasoline demand has reboundedDemand for gasoline in the US turned positive in March, jumping 3.8% year-over-year. The rebound in gasoline demand has been buoyed by a near 20% decline in gasoline prices. The rebound in gasoline demand is a reversal of recent trends, as gasoline demand was consistently tracking below the prior year's levels.
☆ The Fed won't be able to bring inflation down to its target, and Americans will have to live with high prices for years, BlackRock says
  + stars: | 2023-04-11 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +3 min
BlackRock strategists expect the Fed will stop its rate-hiking cycle without getting inflation to its 2% target. That means Americans will have to live with high prices for years to come, they said. Strategists from the world's largest asset manager said inflation has sparked a cost-of-living crisis, and the Fed has responded with all-out approach to cool prices. "We think the 'politics of inflation' narrative is on the cusp of changing," strategists wrote in a note Monday. And Nobel economist Paul Krugman, for his part, said the job market is the best its been in decades, and the Fed won't need high unemployment to bring down inflation.
☆ Markets and the economy survived a tough first quarter, but it's not going to get any easier
  + stars: | 2023-04-01 | by ( Jeff Cox | ) www.cnbc.com   time to read: +8 min
Despite peaks and valleys, stocks closed the first quarter on an up note, with the S & P 500 rallying more than 7% and the tech-fueled Nasdaq soaring about 16%. .SPX .DJI YTD line S & P 500 gains so far in 2023 Indeed, the market has lived through a lifetime of scary headlines in the first three months of 2023. Despite repeated protestations from Fed officials that they are taking the higher-for-longer approach on interest rates, markets still expect cuts. AAPL .SPX YTD mountain Apple compared to the S & P 500 Only five of the 11 S & P 500 sectors are positive for the year, despite the substantial rally for the index. The net profit margin for the S & P 500 also is expected to edge lower to 11.2%.
☆ The Nasdaq 100 just entered a fresh bull market - and a top analyst says tech names look like the new safety trade
  + stars: | 2023-03-31 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +6 min
Those rate forecasts have bolstered tech names, and mega-caps like Apple and Microsoft have pulled the Nasdaq higher. "While it sounds like Twilight Zone comment to many investors, tech stocks have become the new safety trade with Big Tech names a major beneficiary of this dynamic," Ives, a managing director and senior equity research analyst at Wedbush, wrote in a note. "And these tech stocks have been under owned and still remain in that camp in our opinion." Short sellers generated paper profit of $14 billion betting against bank stocks over the last month. Shorting bank names in March produced a "wide swath of profitable trades that returned +17.2% in less than a month," S3 Partners said.
☆ A key recession indicator suggests the Fed may slash rates soon
  + stars: | 2023-03-30 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +6 min
There's another bond market signal flashing and it could mean the Fed's about to step in. The Fed raised short-term interest rates by a quarter percentage point as expected today, with market watchers expecting one more increase this year and three more in 2019. But there are other bond market signs, too, and the recent rally in bonds at the shorter-term end of the Treasury curve may just be the indicator with the most troubling track record. In effect, the bond market is telling us that the Fed could be on the brink of making a policy pivot as the economy falters. Investors are shifting focus back to the Fed's thinking on interest rates, with a PCE inflation update due Friday.
☆ The Nasdaq just entered a bull market as the Fed fuels tech stocks toward their 2nd-best quarter in a decade
  + stars: | 2023-03-30 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +3 min
The Nasdaq 100 entered a bull market on Wednesday, rallying more than 20% from its December low. The Nasdaq has gained 17% in the first three months of 2023, with a few days left in the first quarter. The last time the Nasdaq 100 entered a bull market was in April 2020, a quarter that also marked the best stretch in the last decade. Signs of financial stress historically have prompted investors to buy more stocks, according to a Thursday note from DataTrek Research. DataTrek highlighted that the St. Louis Fed Financial Stress index reading is currently in the same ballpark as it was in July and August of 2002, as well as October 2011 — two similar periods of financial stress.
☆ A recession is guaranteed this year based on Jerome Powell's favorite bond-market gauge
  + stars: | 2023-03-23 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +3 min
Fed Chairman Jerome Powell's preferred bond-market indicator says a recession is on the way this year. It's the spread between the yield on three-month Treasury bills and their expected yield in 18 months. The spread between the current yield on three-month Treasury bills and their expected yield in 18 months is now inverted by a record 134 basis points. The Fed's messaging, however, contrasted with market expectations, as Powell said interest rates will still remain elevated through the year. "If the US economy continues to rumble along as it has the last few quarters, interest rates will remain high," DataTrek Research's cofounder, Nicholas Colas, wrote in a note Thursday.
☆ Bank turmoil drags oil prices down to 15-month low
  + stars: | 2023-03-16 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +3 min
Banking chaos is weighing on oil prices, as crude benchmarks hit their lowest levels since December 2021. Fed policy and US and European bank turmoil have darkened the global economic outlook in the last week. A week ago, the US benchmark was nearly 12% higher, and global crude traded about 11% higher. On Friday, regulators shut down Silicon Valley Bank, and two days later did the same to Signature Bank. "That, and lower oil prices/interest rates may soften the economic blow of tighter lending standards."
☆ Silicon Valley Bank and inflation complicate the Fed’s next move
  + stars: | 2023-03-15 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +5 min
Everyday now we've been talking about Silicon Valley Bank — SVB — and I've had to catch myself several times from saying SBF — Sam Bankman-Fried — the guy behind the other big financial collapse in recent months. A) No rate hike at allB) 25 basis pointsC) 50 basis pointsTweet me (@philrosenn) or email me (prosen@insider.com) to let me know. Bank stocks are rising again as nerves calm — though SVB-driven fears are still niggling. Bank of America picked out a batch of financial stocks that offer upside right now amid the chaos. The token soared 15% as the February CPI print fueled more speculation for a smaller rate hike.
☆ Here's why you should expect a housing rebound, according to a top economist at the National Association of Realtors
  + stars: | 2023-03-11 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +6 min
On tap today we've got a great interview with a top real estate economist and this week's best markets stories, including updates on the Silicon Valley Bank meltdown. Nadia Evangelou: What we see in the data is that the housing market will likely pick up in the coming months, in the spring season. NE: It seems that homesales activity has bottomed out, and 2023 will be the turning point for the housing market. Due to low inventory, even though there are relatively few buyers on the market, housing demand continues to outpace housing supply. We expect 4.5 million homes to be sold in 2023, and about 5.3 million homes to be sold in 2024.
☆ Investors fear inflation, higher yields may make U.S. equities 'dead money'
  + stars: | 2023-03-09 | by ( David Randall | ) www.reuters.com   time to read: +5 min
Jonathan Golub, managing director at Credit Suisse, is among those with a bleak outlook for equities. "A six-month (Treasury) yield effectively guaranteed at 5.25% changes the dynamics for investors when the stock market looks shaky," he said. "You would need to get risk-adjusted returns in equities of at least 1 or 2 percentage points more than that, so in that environment stocks are not worth the effort and are dead money. Still, stocks have managed to hold onto their year-to-date gains so far even as bond yields have risen, with the S&P 500 up 4% and the Nasdaq Composite up nearly 11%. "You no longer have to hold your nose and invest in stocks because there's no other alternative," he said.
☆ Be cautious on Big Tech stocks even though the Nasdaq has been beating the S&P 500 so far in 2023, DataTrek says
  + stars: | 2023-03-09 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +2 min
The Nasdaq has outperformed the S&P 500 to start the year by a significant margin. When the Nasdaq beats the S&P 500 by 5 points or more over 50 days, underperformance has followed. In 2023, the Nasdaq is up roughly 10.6%, while the S&P 500 is up about 4%. In every instance, the Nasdaq then went on to underperform the S&P 500, they said. They've had a great relative run versus the S&P 500, "but +12 years of market history says it is time to be more cautious," DataTrek said.
☆ Jerome Powell isn't winning any popularity contests among investors as markets booed his testimony on Tuesday
  + stars: | 2023-03-08 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +6 min
If you missed Jerome Powell's remarks from his first day on Capitol Hill yesterday, the TLDR is that more rate hikes are coming because the economy's still running hot. The market response to Powell's testimony was anything but muted. The idea is to eventually lower inflation — which most recently clocked in at 6.4% — but the more rate hikes we see, the greater the risk of a recession. So in short: stocks sold off, bond yields jumped, and traders eyed greater potential for a bigger rate hike this month. "If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," Powell said.
☆ Here's why hawkish Powell testimony might not derail the stock market rally
  + stars: | 2023-03-07 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +5 min
Today, all eyes will be on central bank chairman Jerome Powell as he begins two days of hearings on Capitol Hill. Chairman of the Federal Reserve nominee Jerome Powell testifies during his confirmation hearing before the Senate Banking, Housing and Urban Affairs Committee November 28, 2017 on Capitol Hill in Washington, DC. Fed policy aside, the stock market has marched higher to start the year, with the S&P 500 gaining about 6% over the last nine weeks. US stock futures rise early Tuesday, as investors await the two-day testimony of Fed Chair Jerome Powell. The bear market rally isn't over yet as stocks just survived a crucial test.
☆ Earnings estimates have seen the steepest cuts in 7 years, but that doesn't spell doom for the stock market, DataTrek says
  + stars: | 2023-03-06 | by ( Carla Mozée | ) www.businessinsider.com   time to read: +3 min
Stocks have held up even as analysts have cut 2023 S&P 500 earnings expectations by the most in years. DataTrek says stable earnings expectations is the best answer as to why stocks have been resilient. stable earnings expectations is the single best answer," Nicholas Colas, co-founder of DataTrek Research, in a note published Monday. "That still works out to $205/share ($51.15/share times 4), or 26 percent higher than the 2018 – 2019 pre-pandemic average S&P earnings of $162/share. "Yes, interest/discount rates are higher but without a material deterioration in earnings expectations that dynamic plays second fiddle to a stable outlook for earnings," he said.
☆ Here's one bullish factor the stock market can continue to rely on to limit future downside, DataTrek says
  + stars: | 2023-02-27 | by ( Matthew Fox | ) www.businessinsider.com   time to read: +3 min
The stock market is relying on its earnings power to limit further downside, according to a note from DataTrek. The S&P 500 continuing to deliver $200+ in earnings per share "should limit US equity market volatility," DataTrek said. In April 2021, when the S&P 500 first crossed the 4,000 level, the 2-year US Treasury yield was just 0.1%. And as long as S&P 500 earnings hold steady and the index trades flat, that could be a solid win for the bulls as many investors expect big downside ahead. "S&P 500 earnings of $210 to $220 per share have been the market's anchor as market sentiment shifts.
☆ The stock market's euphoric rally has been a head fake, Wall Street's top strategists warn
  + stars: | 2023-02-25 | by ( Morgan Chittum | ) www.businessinsider.com   time to read: +5 min
The year-to-date rally can't last, according to Morgan Stanley's chief US equity strategist. Sign up for our newsletter to get the inside scoop on what traders are talking about — delivered daily to your inbox. He added: "This is a perfect analogy for where equity investors find themselves today, and quite frankly, where they've been many times over the past decade." Goldman Sachs' chief US equity strategist David Kostin has said he is also skeptical of the market's gains so far in 2023. Meanwhile, JPMorgan's top stock strategist Marko Kolanovic, a long-time equities bull, says investors should ditch stocks because a recession is coming.
☆ Fed economists say the central bank will have to cause serious pain to Americans and the economy if it sticks to its current path
  + stars: | 2023-02-24 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +6 min
In the Fed minutes released this week, the central bank's own economists have started to sound the alarm on a recession. Jerome Powell, for his part, has insisted that the Fed's 2% inflation target is set in stone. The jobless rate today stands at 3.4%. We will have other things to worry about at that point besides whether the Fed's inflation target should be 2.0 or 2.75 percent." How realistic do you think the Fed's 2% inflation target is?
☆ Lowering inflation to the Fed's target would require a deep recession that more than doubles unemployment, say Cleveland Fed economists
  + stars: | 2023-02-23 | by ( Phil Rosen | ) www.businessinsider.com   time to read: +3 min
Cleveland Fed economists wrote a working paper arguing that inflation will remain above the Fed's 2% goal by the end of 2025. Unemployment will soar and a deep recession will ensue if the Fed remains committed to its current goals, the economists said. But the Cleveland Fed economists are warning of the downsides to that, noting that policymakers' Summary of Economic Projections (SEP) appears to be a stretch. The economists added that for the Fed's stated 2% inflation target to be achieved, the unemployment rate would have to climb to 7.4% for one year. We will have other things to worry about at that point besides whether the Fed's inflation target should be 2.0 or 2.75 percent."
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