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Economic Indicators

Instant View: S&P 500 on pace to confirm bear market as stocks slump

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© Reuters. FILE PHOTO: A Wall Street sign outside the New York Stock Exchange in New York City, New York, U.S., October 2, 2020. REUTERS/Carlo Allegri

NEW YORK (Reuters) – Wall Street’s main stock indexes slumped on Friday, with the benchmark S&P 500 on track to confirm a decline of more than 20% or more from its Jan. 3 record closing high, a commonly used metric to determine a bear market.

Stocks have been under pressure since the start of the year as investors have dumped stocks amid worries over whether the Federal Reserve will be able to tame inflation without triggering a recession, with spillover effects from the war in Ukraine and the possibility of a slowdown in China from a rise in COVID-19 cases adding to the angst.

STORY:

MARKET REACTION: STOCKS: Dow down 1.35%, S&P 500 down 1.62%, Nasdaq down 2.23%

COMMENTS:

TOM MARTIN, SENIOR PORTFOLIO MANAGER, GLOBALT INVESTMENTS, ATLANTA

“The most important time in the market is typically the last hour of trading. I’d rather say that if we continue to close down in that last hour, that probably doesn’t bode well. But if we get a rally in the last hour with buyers stepping in, that does give some hope.”

“The market is cumulatively absorbing the information over the last week or so, particularly with the retail earnings that we’ve seen which has resulted in many of those stocks getting hammered.”

“Certainly, the sentiment among consumers is pretty negative. And when you relate that to investor positioning in the market, there’s been a fair amount of money with exposure to the markets that we’d like to have less and hedge funds are reducing their overall exposure. They are selling what they can, they’re having to cover their shorts, but clearly, the selling of longs is overwhelming any short covering.”

“So as people adjust to this, they are looking for where that bottom is, and, you know, the consensus seems to have been prior to today that we weren’t there yet. Now, whether this takes us there, down to that market level of support that might be at least a temporary bottom before we could get some sort of balance is an open question. And, you know, people looking to things like the VIX  which although up today is still below levels that have in the past been associated with market bottoms.”

“As bad as the markets are reacting, they haven’t reacted to the extent on average that they’ve reacted to recessionary environments before. So there’s more to go if we are indeed going to go into a recession and have an average market decline associated with that. A lot of that is going to depend on the actual path of inflation, and on what the Federal Reserve does, among other things like the war in Ukraine and the COVID policy in China etc. So there remains a high level of uncertainty. And you just don’t know whether we’ve reached enough of a bottom that there’ll be a counter trend rally.”

BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN

“We have to see if we close at these levels or not, but investors are clearly afraid of a recession. Corrections are driven by fears of inflation, recession, and geopolitics. We have the trifecta going on right now. Whether we stay at these levels or go lower depends on whether the fears become reality. The reports from major retailers increase the perceived odds of a recession being realized soon, but I’m not convinced that they’re bellwethers. A little more stimulus from China or maybe a more stable inflation print on Friday from the PCE price index could help provide a floor.”

KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH

“It’s a watermark but it’s relatively meaningless. Can it go lower? Yes of course.”

“Hitting this mark, maintaining it and not going lower might give investors the confidence to buy.”

“Investors are all about the worst case scenario … so all these geopolitical things could push us lower. That being said today China rate cut gave us a positive open. It is something that, if you’re a longer term investor, you need to pay attention to. This is because China’s rate cut might make the Fed less aggressive out to concern for a too strong dollar.”

“A higher interest rate environment calls for lower multiples. That’s what we’ve been doing is decreasing the multiple on stocks … if that pressure alleviates we could get back in the business of looking at businesses.”

PAUL NOLTE, PORTFOLIO MANAGER, KINGSVIEW INVESTMENT MANAGEMENT, CHICAGO

    “If we don’t today it’ll be Monday. In all of the trading that’s gone on in the last couple of weeks, there really hasn’t been much of a bounce. Any bounce we’ve had has gone away quickly. So we’re going to be in a bear market today if not next week. It’s more inevitable than it is anything else. It’s a given, certainly with what’s happened to Nasdaq and small caps. It’s not a surprise that the S&P finally gets there.

    “I don’t think investors sell because we’re now in a bear market. They’ve been selling all along. The question is still what does the Fed do. They have historically come to the market’s rescue. We’re not sure where the Powell put is this time around – or if there is one… Although they’ve raised rates twice, we really haven’t seen any impact in the economy outside of housing.”

RANDY FREDERICK, VICE PRESIDENT OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS

“It does look like we are finally going to actually hit a bear market on the S&P 500 which to me is the final straw that says you are truly in a bear market, you have to close below 3,836, which we are below that level now. Now we could get one of those late-day rallies like we sometimes get so it may not happen.”

“But the one thing that doesn’t really seem to line up as far as the washout goes, or the capitulation, is just with the VIX. Thirty-two is not a low VIX, historically it is high, but it is not at all in line with what you oftentimes see when everybody throws in the towel, I am selling indiscriminately, I’m fed up, I am just trying to save what I got left kind of thinking. We just haven’t seen that.”

“Generally, you are going to need to see something above forty and sometimes it is even way above that. If you go back to the COVID bear market in early 2020 it hit like eighty so it is nothing even close to that. I believe we are going to go into a bear market, whether that happens today or early next week I am not sure, but I am not convinced we are at the bottom yet simply because of that.”

“Now it is not required you have one of those days but you oftentimes do, we could just simply go into a continued, slow, downtrend which frankly we have been in since the second day of this year. While that doesn’t hurt as much all at once, it is like pulling the band-aid off slowly, it is going to be long and slow and painful and frankly could go on for several more months so I just don’t know. But without that big, giant volatility spike and that capitulation-type feeling I am hesitant to make any predictions that we are at the bottom.”

Economic Indicators

Italy says can exceed 3.1% growth target for 2022 despite energy prices

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© Reuters. FILE PHOTO: People walk along the Galleria Vittorio Emanuele II shopping mall in Milan, August 25, 2015. REUTERS/Flavio Lo Scalzo

ROME (Reuters) – Italy’s Treasury said the country’s economy could grow this year by at least as much as Rome’s official target of 3.1% set in April, despite the negative impact of surging energy prices.

Italy grew 0.1% in the first quarter from the previous three months, national statistics bureau ISTAT said last month, revising up a preliminary estimate of a 0.2% contraction.

This left Italy with so-called “carryover” growth of 2.6% this year, assuming gross domestic product was flat in the remaining three quarters, ISTAT said.

Announcing on Monday the bond issuance programme for the third quarter, the Treasury said it expected growth to accelerate in the second quarter, compared with the first three months.

This still makes it plausible to reach or exceed the 2022 growth target of 3.1%, it said in its debt issuance report.

Prime Minister Mario Draghi’s government in April revised down its 2022 economic growth forecast to 3.1% from a 4.7% projection made last September.

The government has budgeted since January more than 33 billion euros ($34.90 billion) to soften the impact of sky-high electricity, gas and petrol costs.

($1 = 0.9456 euros)

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Economic Indicators

French consumer confidence falls more than expected in June

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© Reuters. A woman shops at a fruit and vegetables shop in Paris, France, June 10, 2022. REUTERS/Sarah Meyssonnier

PARIS (Reuters) – French consumer confidence fell more than expected in June, hitting a near nine-year low as concerns about the economic outlook surged in the face of high inflation and political uncertainty, a survey showed on Tuesday.

The INSEE official statistics agency said its consumer confidence index fell to 82 in June from 85 in May and the lowest level since July 2013.

A Reuters poll of 14 economists had an average forecast of 84 with the lowest estimate for 83.

Although households’ concerns about future inflation remained well above the long-term average, they eased in June for the third month in a row.

However, household sentiment about the general economic outlook continued to worsen, falling to the lowest level since May 2020 when France was in the second month of its first and most strict COVID-19 lockdown.

While surging inflation has stressed households in recent months, France’s political situation has added to uncertainty about the economic outlook since President Emmanuel Macron’s party lost its ruling majority in legislative elections this month.

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Economic Indicators

Peru truckers, farmers to strike over fuel and fertilizer costs

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© Reuters. FILE PHOTO: People walk next to parked trucks during a national transportation strike against fuel prices, in Lima, Peru March 18, 2021. REUTERS/Angela Ponce/File Photo

By Marco Aquino

LIMA (Reuters) – Peru’s truckers and some farm groups will go on strike on Monday after failing to reach agreements with the government seeking measures to reduce the impact of steep global price rises of fuel and fertilizer, sector leaders said on Sunday.

Union leaders met on Friday and Saturday with government representatives, with demands including considering freight transport a “public service” that would reduce costs and curb competition from truckers from neighbor countries.

“We are firm in plans to strike with all our bases nationwide,” the leader of the heavy load haulage and drivers union Marlon Milla told radio station RPP. The union has 400,000 cargo transport units in 14 of the 25 regions of the country.

High global fuel prices linked to Russia’s invasion of Ukraine have stoked unrest in Peru, the world’s No. 2 copper producer, while shortages of fertilizer have raised fears over food supply with the government struggling to secure shipments.

The government of leftist President Pedro Castillo, who has seen his popularity tumble since taking office last year, has taken measures to curb the rising cost of living, but the annual inflation rate remains at around 8%, its highest level in 24 years.

Some farming unions also announced strikes on Monday, in protest at the rise in fertilizer prices and shortages.

Latin American leaders are grappling to bring down spiraling prices despite major interest rate hikes. Trucking protests over fuel costs have hit Argentina while Ecuador is being roiled by protests in part linked to gas prices. [L4N2YB27W]

“The dialogue has not been exhausted, we are in a permanent session of ministers to avoid protest,” Justice Minister Félix Chero told reporters on Sunday. The government is offering subsidies for road tolls and fertilizer costs.

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