Connect with us

Economy

Whispers of S&P 500 bear market grow louder as U.S. stock decline continues

Published

on


© Reuters. FILE PHOTO: The Dow Jones Industrial Average is displayed on a screen after the close of the day’s trading at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., May 5, 2022. REUTERS/Andrew Kelly

By David Randall

NEW YORK (Reuters) -Expectations of a hawkish Federal Reserve are dimming Wall Street’s outlook for stocks, with some investors now bracing for a potential bear market in the benchmark S&P 500 index.

A bear market – often thought of as a 20% or more decline from a high – would mark the end of the pandemic-era rally that sent stocks to record levels on the back of unprecedented stimulus from the Federal Reserve.

After falling 2.5% Monday, the S&P 500 was recently around 16% below its high reached Jan. 3 as it struggles through the worst four-month start to a year since 1939. The Nasdaq Composite index reached bear market territory in March and is down nearly 26%.

Though a bear market is not a foregone conclusion, signs of souring sentiment are everywhere as the Fed tightens monetary policy to fight the worst inflation in nearly four decades.

U.S. equity mutual funds and exchange-traded funds notched $37 billion in outflows over the past four weeks, the biggest four-week total since late 2018, according to Goldman Sachs (NYSE:GS). Analysts at Deutsche Bank (ETR:DBKGn) in April forecast a recession accompanied by a 20% S&P 500 drop in 2023, while BofA Global Research strategists last week warned of “rate shock,” predicting the current decline in stocks will continue.

Bearish sentiment in a weekly poll taken by the American Association of Individual Investors stood at 52.9% the week that ended May 4, well above the average rating of 30.5%, while BofA’s survey of fund managers last month showed optimism regarding global growth at an all-time low.

“The Fed has been as slow to respond to inflation as they’ve ever been, and that is leaving me seriously negative on equities,” said David Wright, co-founder of $9.6 billion asset manager Sierra Investments.

Wright sees some parallels in the currency economic scenario to 1981, when high inflation forced the Fed to embark on a series of aggressive rate hikes, pushing the economy into recession. He has slashed his holding of equities and is moving into municipal bonds in preparation for a months-long bear market.

The Federal Reserve announced a 50 basis point hike last week and signaled that it will raise rates by 50 basis points at its next two meetings. Investors are currently pricing in a total of 209 basis points in tightening this year, putting the central bank on track for its most aggressive tightening path since 1994.

Sameer Samana, senior global market strategist at Wells Fargo (NYSE:WFC), said the S&P 500 has a one in three chance of falling into a bear market if it slipped below what he saw as a technical support level of 4,100, a level it fell below on Monday.

John Lynch, chief investment officer at Comerica (NYSE:CMA) Wealth Management, believes the furious, 115% rally stocks saw from their COVID-19 lows leave them vulnerable to a sustained decline.

“It’s conceivable the S&P 500 needs to establish a bottom” that would take it into a bear market, given that the index hit 70 new records last year without more than a 5% pullback, he wrote Friday.

Overall, there have been 14 bear markets since 1945, with stocks losing an average of 36% over 289 days, according to data from Hartford Funds.

While not all bear markets have coincided with recessions, every recession since 1968 has prompted a bear market, according to data from CFRA Research. Goldman Sachs analysts recently put the chances of recession in the next year at 35%.

Not all strategists see sustained losses ahead.

Jonathan Golub at Credit Suisse lowered his year-end target price for the S&P 500 down to 4,900 from 5,200 last week, a move that would imply a nearly 22% gain from the current level of the index and a roughly 3% gain for the year.

Analysts at Truist Advisory Services downgraded their market targets last month but have not grown more negative in the most recent decline, wrote Keith Lerner, the firm’s co-chief investment officer.

“There has been a pretty good reset in valuations and investor expectations, and a large degree of Fed tightening is already priced into the market,” he wrote.

Others, however, believe the Fed’s hyper-focus on inflation makes recession more likely and will continue pounding stocks.

“Inflation means the Fed must tighten until it breaks the economy or the market,” said Michael Harnett, chief investment strategist at Bank of America (NYSE:BAC). “Until it does, asset prices must reset lower.”

Economy

Dollar slips from 2-decade highs; yuan falls on weak China data

Published

on


© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic

By Sinéad Carew

NEW YORK (Reuters) – The U.S. dollar index was lower on Monday after hitting a 20-year peak last week, with the global economy in focus after weak economic data from China highlighted worries about the prospects for a global slowdown.

Creating a risk-off mood on Monday, China’s retail and factory activity fell sharply in April as extensive COVID-19 lockdowns confined workers and consumers to their homes. But Shanghai did set out plans for the return to more normal life from June 1.

Following the release of China’s data, Bipan Rai, North America head of FX Strategy at CIBC Capital Markets, said trading was focused on macro economic data on Monday.

“It’s important to highlight that the risks are towards a stronger dollar and primarily, that’s because if you look at the macro economic climate, the fundamentals don’t look good. From a risk-off perspective that should still support the dollar against most currencies,” Rai said.

But he said the greenback was consolidating after its recent strength and that more range-bound trading sessions were possible: “It makes sense for some period of consolidation before the next leg higher.”

Trading in the dollar may be muted partly because a lot of bad news has already been priced in but also because investors are waiting for events such as the U.S. retail sales data release and a public appearance by Fed Chair Jerome Powell both scheduled for Tuesday, according to Mazen Issa, senior FX strategist at TD Securities. [nL2N2X52F6]

Still Issa said he doesn’t “think we’re in a market where we’re going to see the dollar weaken … It’s going to take a lot to get investors out of the dollar.”

The euro was pulled from its earlier lows after European Central Bank policymaker Francois Villeroy de Galhau said the common currency’s weakness could threaten the ECB’s efforts to steer inflation towards its target.

The Australian dollar, which is highly exposed to the Chinese economy, reversed course as the day wore on and was last up against the dollar after falling as much as 0.9%.

The dollar index was last down 0.37% at 104.16, after briefly crossing the 105 level on Friday – its highest level since December 2002, after six successive weeks of gains. Weekly positioning data showed that investors had built their long dollar bets.

The euro was up 0.26% at $1.0438 but not far from last week’s low of $1.0354, its lowest level since early 2017. Analysts see $1.0340 as a crucial level of euro support.

HSBC strategists expect the euro to fall to parity against the dollar in the coming year. “Much weaker growth and much higher inflation leave the ECB facing one of the toughest policy challenges in G10 (central banks),” they said.

Crypto markets, which trade around the clock, had a quiet weekend after turmoil last week driven by TerraUSD, a so-called stablecoin, which broke its dollar peg. An affiliate of the company behind TerraUSD said it had spent the bulk of its reserves trying to defend its dollar peg and would use the remainder to try to compensate some users who had lost out.

Bitcoin was last trading at around $29,881, down more than 4%, after having dropped to $25,400 on Thursday, its lowest mark since December 2020.

Currency bid prices at 3:03PM (1903 GMT)

Continue Reading

Economy

Taliban dissolve Afghanistan’s Human Rights Commission, other key bodies

Published

on


© Reuters. FILE PHOTO: An Afghan woman walks on a street in Kabul, Afghanistan, May 9, 2022. REUTERS/Ali Khara/File Photo

By Mohammad Yunus Yawar

KABUL (Reuters) – Taliban authorities in Afghanistan dissolved five key departments of the former U.S.-backed government, including the country’s Human Rights Commission, deeming them unnecessary in the face of a financial crunch, an official said on Monday.

Afghanistan faces a budget deficit of 44 billion Afghanis ($501 million) this financial year, Taliban authorities said on Saturday as they announced their first annual national budget since taking over the war-torn country last August.

“Because these departments were not deemed necessary and were not included in the budget, they have been dissolved,” Innamullah Samangani, the Taliban government’s deputy spokesman, told Reuters.

Also dissolved was the High Council for National Reconciliation (HCNR), the once high-powered National Security Council, and the commission for overseeing the implementation of the Afghan constitution.

The HCNR was last headed by former Afghan President Abdullah Abdullah, and was working to negotiate a peace between the U.S.-backed government of former President Ashraf Ghani and the then-insurgent Taliban.

In August 2021, 20 years after invading Afghanistan, foreign forces withdrew from the country leading to the collapse of the government and a Taliban takeover.

Samangani said the national budget was “based on objective facts” and intended only for departments that had been active and productive.

He added that the bodies could be reactivated in the future “if needed”.

The Taliban ruled Afghanistan from 1996 to 2001 with an iron fist and implemented a harsh version of Islamic rule, including banning women from education and work. After taking over last year, the Taliban assured the world they would be more moderate.

However, they are yet to allow older girls to restart education, and have also introduced rules that mandate that women and girls wear veils and requiring them to have male relatives accompany them in public places.

Continue Reading

Economy

U.S. SEC chair says much to be done to protect crypto investors

Published

on

2/2

© Reuters. FILE PHOTO: Representations of virtual cryptocurrencies are placed on U.S. dollar banknotes in this illustration taken November 28, 2021. REUTERS/Dado Ruvic

2/2

By John McCrank

(Reuters) – Cryptocurrency assets are highly speculative and investors in them need more protections or they could lose trust in the markets, Gary Gensler, chair of the U.S. Securities and Exchange Commission, said on Monday.

Generally, people who buy cryptocurrencies do not get the disclosures they get when they make other asset purchases around things like whether the trading platform they are using is actually trading against them, or whether they actually own the assets they store in digital wallets, Gensler said.

“We have this basic bargain: You the investing public can make your choices about the risk you take, but there is supposed to be full and fair disclosure, and people are not supposed to lie to you,” he said at the Financial Industry Regulatory Authority’s annual conference in Washington.

His comments came after last week’s spectacular collapse of TerraUSD, a so-called stablecoin that lost its 1-to-1 dollar peg.

The token’s crash sent cryptocurrencies tumbling, a slide that resumed on Monday, as bitcoin erased the gains it had eked out over the weekend to trade under $30,000, far below its Nov. 10 record of $69,000.

While crypto markets are thought of as decentralized, the reality is that most activity occurs on a handful of trading platforms, which, along with token issuers, need to work with the SEC to improve industry rules and disclosures, Gensler said.

He pointed to basic market principles like, “anti-fraud, anti-manipulation, making sure there’s not front-running, making sure an order book is actually real and not made up.”

The SEC will continue to be “a cop on the beat,” while working with the Commodity Futures Trading Commission to ensure all cryptocurrencies are covered, Gensler said.

“There’s a lot to be done here, and in the meantime the investing public is not that well protected,” he said.

Continue Reading

News

Stock Markets11 mins ago

Rocket Lab USA Shares Gain 5% on Q1 Earnings Beat and Raise

© Reuters. Rocket Lab USA Shares Gain 5% on Q1 Earnings Beat and Raise Rocket Lab USA, Inc. (RKLB) shares...

Stock Markets12 mins ago

United Airlines lifts second-quarter revenue forecast

© Reuters. FILE PHOTO: United Airlines planes are parked at their gates at O’Hare International Airport ahead of the Thanksgiving...

Cryptocurrency12 mins ago

MakerDAO price rebounds as DAI holds its peg and investors search for stablecoin security

MakerDAO price rebounds as DAI holds its peg and investors search for stablecoin security Its been a rough couple of...

World13 mins ago

Democratic frontrunner in Pennsylvania Senate primary to skip rally after stroke

© Reuters. FILE PHOTO: Lt. Gov. John Fetterman, U.S. Democratic Senate candidate for Pennsylvania, poses for a portrait at a...

Commodities13 mins ago

Moscow says G7 attempts to isolate Russia make global food crisis worse

© Reuters. FILE PHOTO: Ears of wheat are seen in a field near the village of Zhovtneve, Ukraine, July 14,...

World13 mins ago

U.S. rolls out revised Cuba policy, easing some restrictions on remittances, travel

© Reuters. FILE PHOTO: Emigres wave American and Cuban flags outside Versailles restaurant, in reaction to reports of protests in...

Sports & General13 mins ago

Johnny Depp’s attorneys challenge Amber Heard on abuse claims

3/3 © Reuters. FILE PHOTO: Actor Johnny Depp reacts as he leaves for a recess during a defamation trial against...

Stock Markets42 mins ago

Tencent Music Reports Q1 Miss, Revenues Down 15.1%

© Reuters. Tencent Music (TME) Tencent Music Reports Q1 Miss, Revenues Down 15.1% Tencent Music Entertainment Group (NYSE:TME) reported its Q1...

Stock Markets42 mins ago

Rivian Automotive CEO Purchases $1 Million Worth of Stock

© Reuters Rivian Automotive CEO Purchases $1 Million Worth of Stock According to SEC Form 4, on May 16, Robert...

Stock Markets43 mins ago

Buffett-backed Nubank swings to profit on strong client base, loan volumes

© Reuters. FILE PHOTO: A banner for Nubank, the Brazilian FinTech startup, hangs on the facade at the New York...

World43 mins ago

Ukrainian force begins evacuating from last Mariupol stronghold

2/2 © Reuters. FILE PHOTO: A local resident rides a bicycle past a charred armoured vehicle during Ukraine-Russia conflict in...

Cryptocurrency1 hour ago

Do Kwon proposes Terra hard fork to save ecosystem

Do Kwon proposes Terra hard fork to save ecosystem On Monday, Do Kwon, co-founder of the troubled Terra Luna blockchain,...

Cryptocurrency1 hour ago

Brazilian Stock Exchange set to launch Bitcoin and Ethereum futures

Brazilian Stock Exchange set to launch Bitcoin and Ethereum futures The Brazilian Stock Exchange, B3, is set to launch its...

Stock Markets1 hour ago

Abbott, FDA enter deal over reopening of baby formula facility in Michigan

© Reuters. FILE PHOTO: Abbott Laboratories logo is displayed on a screen at the New York Stock Exchange (NYSE) in...

World1 hour ago

California law requiring women on company boards struck down

© Reuters. FILE PHOTO: A view of the skyline of downtown Los Angeles, California, U.S., March 22, 2022. REUTERS/Mike Blake...

Stock Markets1 hour ago

Take-Two Shares Gain 3% Following Q4 Earnings Beat

© Reuters. Take-Two Shares Gain 3% Following Q4 Earnings Beat Take-Two Interactive Software (NASDAQ:TTWO) shares were trading around 3% higher...

Stock Markets1 hour ago

Retail Sales, Walmart Earnings, Home Depot: 3 Things to Watch

© Reuters. By Liz Moyer Investing.com — Stocks wobbled on Monday ahead of a key economic data report and amid...

Commodities1 hour ago

After fires and floods, climate-conscious independents could determine Australian election

3/3 © Reuters. Local residents Fiona and Ian Stuart stand near blackened trees on their property, burnt during the bushfires...

World2 hours ago

California church shooter was motivated by hate, politics

4/4 © Reuters. The Geneva Presbyterian Church is seen after a deadly shooting, in Laguna Woods, California, U.S. May 15,...

Stock Markets2 hours ago

Tencent Music quarterly revenue falls as competition heats up

© Reuters. FILE PHOTO: The logo of China’s Tencent Music Entertainment Group is seen next to an earphone in this...

Stock Markets2 hours ago

S&P 500 ends lower as Tesla falls, while energy rallies

© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May...

World2 hours ago

Steelworks defenders appear to signal end of Mariupol siege

2/2 © Reuters. FILE PHOTO: A local resident rides a bicycle past a charred armoured vehicle during Ukraine-Russia conflict in...

Stock Markets2 hours ago

Musk tells conference a lower price for Twitter might be appropriate

© Reuters. FILE PHOTO: A 3D-printed Twitter logo on non-3D printed Twitter logos is seen in this picture illustration taken...

Stock Markets2 hours ago

FDA to soon authorize Pfizer’s COVID booster shot for younger kids – NYT

© Reuters. FILE PHOTO: Empty vials of the Pfizer-BioNTech coronavirus disease (COVID-19) vaccine are seen at The Michener Institute, in...

Cryptocurrency2 hours ago

Price analysis 5/16: BTC, ETH, BNB, XRP, ADA, SOL, DOGE, DOT, AVAX, SHIB

Price analysis 5/16: BTC, ETH, BNB, XRP, ADA, SOL, DOGE, DOT, AVAX, SHIB The selling in Bitcoin (BTC) is showing...

World2 hours ago

New York congressional map deals blow to Democrats’ midterm hopes

© Reuters. FILE PHOTO: A “Vote” sign is pictured on election day in the Manhattan borough of New York City,...

Coronavirus2 hours ago

FDA declines to authorize common antidepressant as COVID treatment

© Reuters. FILE PHOTO: Signage is seen outside of the Food and Drug Administration (FDA) headquarters in White Oak, Maryland,...

Stock Markets2 hours ago

Wall Street ends lower as Tesla falls, while energy rallies

© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May...

Coronavirus2 hours ago

Coronavirus may be linked to cases of severe hepatitis in children

© Reuters. A firefighter from the Marins-Pompiers of Marseille (Marseille Naval Fire Battalion) administers a nasal swab to a child...

Stock Markets2 hours ago

Take-Two Earnings Miss, Revenue Beats In Q4

© Reuters. Take-Two Earnings Miss, Revenue Beats In Q4 Investing.com – Take-Two (NASDAQ:TTWO) reported on Monday fourth quarter earnings that...

Trending