Wednesday, June 29, 2022

US Market Wrap 06/29/2022

- The stock market struggled to find direction on Wednesday, as traders weighed comments from central bank chiefs on the economy's and interest rate outlooks.

- The S&P 500 finished almost flat and above the Fibonacci 38.2% retracement level of around 3,815 which investors have been watching closely. Portfolio rebalancing on a quarterly basis contributed to market volatility. Bonds and the dollar both rose.

- The United States is in "strong shape," according to Federal Reserve Chair Jerome Powell, and is "well-positioned to withstand tighter monetary policy." He reiterated his commitment to lowering inflation, but warned that the process would be "painful." Powell took part in a panel discussion alongside European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey.

- Fears that a hawkish Fed will tip the economy into a recession have gripped markets this year. The S&P 500 is on track for its worst quarter since March 2020, as treasury yields rise. The US central bank was in denial about inflation, according to Rob Arnott of Research Affiliates, this has put it on a path to causing a recession if it hasn't already.

- As traders increased their bets on a US recession eventually halting the central bank's aggressive tightening campaign, the bond market shifted to price in a half-point rate cut in the Fed's benchmark rate at some point in 2023.

- Loretta Mester, president of the Federal Reserve Bank of Cleveland, said officials should not be complacent about rising long-term inflation expectations and should act forcefully to reduce price pressures. Consumer spending expanded at the slowest rate of the pandemic recovery in the first quarter, according to data released on Wednesday, implying that the economy is in worse shape than previously thought.

- Chief financial officers are becoming increasingly pessimistic about the economy this year, with one measure of sentiment falling to its lowest level in nearly a decade. According to the latest quarterly results of the CFO survey, a collaboration of Duke University's Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, respondents reduced their growth expectations.

- Peloton Interactive Inc. fell after UBS reaffirmed its sell rating on the at-home fitness company, citing negative user trends. Carnival plc fell after Morgan Stanley warned that if there is another demand shock, the cruise vacation company's shares could lose all of their value. The stock of Bed Bath & Beyond inc. fell after the home-goods retailer reported disappointing earnings.

Tuesday, June 28, 2022

US Market Wrap 06/28/2022

- A sell-off in big tech weighed heavily on stocks, with gains in the broader market sputtering as a report showed Americans became more pessimistic about the economy's prospects.

- Traders were hit with another reality check on Tuesday after a troubling reading on consumer confidence. A measure of expectations, which reflects a six-month outlook, has fallen to a nearly decade low. The data comes at a time when analysts are still optimistic about corporate earnings, with net-margin estimates for S&P 500 companies at an all-time high.

- The bleak economic picture pushed the US equity benchmark lower, after it had gained more than 1% earlier in the day. The index was hovering near the key Fibonacci 38.2% retracement level of 3,815. Portfolio rebalancing on a quarterly basis exacerbated volatility. The Nasdaq 100 fell more than 3%, dragged down by behemoths such as Inc. and Tesla Inc. Treasury bonds and the dollar both rose.

- Margin forecasts are too optimistic, according to Goldman Sachs group inc. strategists, putting stocks at risk of further losses if Wall Street analysts lower their estimates. Meanwhile, HSBC's Kettner stated that equities are still not reflecting the impact of a potential recession, with earnings expectations potentially being revised lower.

- Federal Reserve officials downplayed the risk of the US economy entering a recession, despite raising rates by 75 basis points this month and another 75 basis points next month. Both New York Fed President John Williams and San Francisco Fed President Mary Daly acknowledged the need to reduce inflation but insisted that a soft landing was still possible.

- A key set of rates that the Fed is focusing on to help judge financial conditions is still a long way from reaching levels that would prompt officials to abandon their tightening plans. adjusted for inflation Rates at the short end of the curve remain below zero, despite real rates on longer-term securities reaching levels not seen since 2019.

- Oil rose for a third day as global output threats exacerbated already hot markets for physical supplies, and the Group of Seven agreed to investigate a price cap for Russian crude.

Monday, June 27, 2022

US Market Wrap 06/27/2022

 - After a strong surge last week, stocks dipped as investors rebalanced their portfolios in the last few days of the quarter.

- The S&P 500 struggled to find direction for most of the day at the beginning of a week that is predicted to be volatile and lacking conviction on a market low.

- The Treasury yields increased as the tech-heavy Nasdaq 100 faltered. Dollar prices were little changed.

- A confluence of factors, including aggressive Fed rate rises, impending recession worries, and disturbing inflation numbers, continue to have an impact on market confidence. Until investors are certain that the United States has dodged a recession, the market isn't coming around, according to Kristen Bitterly of Citi Global Wealth Management, "and we are not there yet."

- Prominent Wall Street voices are beginning to believe that the amount of optimism over the business side may be seriously in need of a reality check. According to statistics from a major newswire, analysts anticipate that the S&P 500 businesses' profits would increase by 10.7%, up from 10% a month ago and 8.7% at the beginning of the year.

- Market volatility sparked by fears of a recession is also behind the current trend of corporate-and sovereign-bond deals getting withdrawn. Issuers have pulled 16 transactions globally so far this month.

Friday, June 24, 2022

US Market Wrap 06/24/2022

US stocks rebounded this week from a rout that drove the market down for three straight weeks after recent comments from the Federal Reserve officials buoyed sentiment and reading on inflation expectations eased.

The S&P 500 gained more than 3% Friday, the most since May 2020. it closed the week up 6.5%, clocking in its best week in nearly a month. a rally in treasuries waned on Friday, but the policy-sensitive us two-year yield still recorded its biggest weekly drop since mid-May.

While traders struggled to make sense of a deluge of data this week, mood brightened on Friday after the university of Michigan's measure of longer-term consumer inflation expectations decreased from an initially reported 14-year high, thereby lessening the need for more drastic rate increases. James Bullard, head of the St. Louis Fed, also soothed investors by saying that concerns about a US recession are exaggerated. In testimony to legislators this week, Fed Chair Jerome Powell reaffirmed his commitment to containing inflation, but some traders took comfort in his remarks as a sign that the central bank will take the possibility of a recession into account as it works to do so.

Elsewhere, bitcoin rose, hovering around $21,000. the dollar fell. WTI crude rose after retreating over the previous two sessions. sliding raw materials prices have contributed to a moderation in market-based measures of inflation expectations.

As the residential real estate market responds to higher borrowing costs and still-high prices, new house sales in the US increased in May, indicating rises in the west and south and breaking a months-long slump. The increase in sales could be attributed to some consumers locking up their mortgage rate ahead of potentially much higher borrowing expenses. 

Thursday, June 23, 2022

US Market Wrap 06/23/2022

- As concerns that the economy is headed for a recession increased due to weaker-than-expected statistics and a renewed hawkish tone from federal reserve officials, US stocks increased and Treasuries surged.

- On Thursday, the S&P 500 resumed its upward trend, finishing the day up almost 1%. The tech-focused Nasdaq 100 also increased. The 10-year yield is currently hovering at 3.08% as treasury yields decreased. Oil, copper, and wheat were among the commodities that remained under pressure as indicators of dwindling demand increased.

- Data released on Thursday didn't do much to improve perceptions of a world economy struggling under a wave of central bank interest rate increases. In addition, manufacturing and services activity in the US dropped in June, falling short of expectations and raising concerns that the Fed's attempts to battle inflation may undermine growth, while jobless claims lingered near a five-week high.

- Federal Reserve Chair Jerome Powell stated that his commitment to reducing price increases is "unconditional" in testimony to the US House, contradicting a statement he made before lawmakers on Wednesday but left out at last week's Fed meeting. Fed Governor Michelle Bowman also stated that she is in favor of another 75 basis-point increase in interest rates in July, followed by a couple more half-point increases.

- After two consecutive weeks of losses of more than 5% each, which reset valuations in accordance with the Fed's policy decisions, the S&P 500 increased by more than 2% on Tuesday. However, volatility is still high across all asset classes as analysts question whether the world's largest economy can withstand a fed that appears ready to increase rates by at least 50 basis points each at its next three meetings.

- With the most recent data indicating an extra 175 basis points of raises priced before that meeting, traders are now beginning to price out any action on rates beyond the December meeting.

Tuesday, June 21, 2022

US Market Wrap 06/21/2022

- Following last week's fall, which saw the S&P 500 lose nearly $2 trillion, US markets rose on Tuesday. Treasuries retreated.

- Following the holiday weekend, the S&P 500 gained 2.4%, boosted by oil and consumer discretionary stocks, while the tech-heavy Nasdaq 100 gained 2.5%. Revlon (REV) soared 62% after filing for chapter 11 bankruptcy, Kellogg (K) increased 2.0% after announcing intentions to split into three firms, and a basket of the most-shorted stocks rose 2.7%. Treasury yields fell, bringing the benchmark 10-year yield back to 3.3%.

- President Biden's words that a US recession isn't "inevitable" have helped confidence this week, but the outlook remains bleak for investors pondering whether the market has bottomed. Bear markets, especially when accompanied by a recession, such as the financial crisis of 2008, take time to establish a floor, according to history. The president of the Richmond Federal Reserve, Thomas Barkin, stated that the US central bank should raise interest rates as quickly as possible to combat excessive inflation.

- After unexpectedly surging to a new 40-year high in May, US consumer price rise is projected to decrease, with economists forecasting 6.5% growth in the fourth quarter and 3.5% by the middle of next year, according to a major newswire poll.

- However, concerns are growing that Fed policymakers, in their desire to reduce pricing pressures, could go too far and cause an economic slowdown. Equities may have to fall lower to fully price in the risk of recession, according to strategists at Morgan Stanley and Goldman Sachs Group, reflecting broader scepticism about Tuesday's comeback.

- Crude oil gained. Cryptocurrencies recovered from recent turmoil, Bitcoin reached a new high of $20,000. The dollar was barely altered, and the yen remained approaching a 24-year low, weighed down by the difference between Japan's super-dovish central bank and the US Federal Reserve's aggressive stance. 

Wednesday, June 15, 2022

US Market Wrap 06/15/2022

- After Federal Reserve Chair Jerome Powell warned outsized rate hikes will be rare as authorities tighten their battle against sky-high inflation, stocks recovered, arresting a five-day slide that saw the S&P 500 lose 10% of its value.

- Treasury yields fell in lockstep with the dollar.

- As the central bank lifted rates by 75 basis points, the largest increase since 1994, equities pushed higher amid dramatic swings, and Powell warned officials may raise rates by that much in July or make a smaller half-point boost. While the Fed chair admits that "it will take some time" to get inflation back down, he is optimistic that "we will achieve it." His comments brought two-year treasury yields down as much as 24 basis points.

- On Wednesday, Powell and his colleagues stepped up their efforts to cool prices by raising the federal funds rate target range to 1.5% to 1.75%. Officials expect it to rise to 3.4% by the end of the year, meaning another 175 basis point tightening this year. The Fed also stated that it will continue to cut its large balance sheet by $47.5 billion per month, beginning on June 1st, and up to $95 billion in September.

- Barclays, which was one of the first large banks to change its Fed forecast for June to a 75-basis-point raise, expects the central bank to hike at a 50-basis-point pace in July. Meanwhile, T. Rowe Price Group, which manages $1.4 trillion in assets, advised investors to buy bonds now since they are at their "most appealing moment" in years.

Some of the key FOMC comments: 

- Fed's Powell: The next meeting could well be decision between 50 bps and 75 bps.

- Fed Policymakers' projections show they expect to begin reducing rates in 2024.

- Fed median forecast shows 2022 inflation 5.2%, 2023 2.6%.