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Signs of market bottom elude investors after steep selloff

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© Reuters. FILE PHOTO: “Stock Exchange” is seen over an entrance to the New York Stock Exchange (NYSE) on Wall St. in New York City, U.S., March 29, 2021. REUTERS/Brendan McDermid

By Lewis Krauskopf

NEW YORK (Reuters) – Investors are studying an array of indicators for clues on how much further a brutal slide in U.S. stocks could run, with some signs suggesting the tumble in equities may not be over.

The S&P 500 extended its decline to nearly 20% from January’s record peak on Thursday before an end-of-week bounce, approaching the cusp of a bear market amid concerns that persistently high inflation will prompt more aggressive Federal Reserve interest rate increases that could undermine the economy. Declines have been even steeper in the tech-heavy Nasdaq Composite, which is down 24.5% year-to-date.

Despite those losses, many widely followed indicators do not yet show the pervasive panic, supercharged volatility and outright pessimism that have emerged in past market bottoms – a potentially worrisome signal for those looking to step in and buy on the cheap after the most recent selloff in stocks.

Indeed, stocks ripped higher on Friday, with some pandemic era favorites such as the ARK Innovation ETF showing double-digit percentage gains, albeit from depressed levels.

“I don’t think we are out of the woods yet on a near-term basis,” said Mark Hackett, chief of investment research at Nationwide. “That being said, investor expectations have been reset dramatically.”

For instance, the Cboe Volatility Index, known as “Wall Street’s fear gauge,” now hovers around 30 compared with a long-term median of nearly 18. Past market bottoms, however, have coincided with an average level of 37, and the VIX climbed above 80 in March 2020 during a COVID-19-fueled market plunge after which the S&P 500 more than doubled from its lows on the back of unprecedented Fed stimulus.

Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW) in Austin, Texas, is looking for a one-day spike to a level of at least the mid-40s as likely “where you actually see panic.”

“If I don’t see panic … it might mean we are not at the bottom yet,” he said.

Graphic – Market volatility: https://graphics.reuters.com/USA-STOCKS/WEEKAHEAD/gdpzyazeavw/chart.png

Hackett, of Nationwide, is watching options trading for a spike in the ratio between puts, which are typically bought for downside protection, and calls.

“Most of these indicators, put/call being one of them, are already very bad historically,” Hackett said. However, he said, “we haven’t seen that capitulation where everything is flashing red.”

Meanwhile, analysts at BofA Global Research on Friday shared their “capitulation” checklist, which showed that while some indicators, such as investor cash amounts, have hit critical territory, others have not met levels attained during the peak of past selloffs.

“Fear & loathing suggest stocks prone to imminent bear market rally but we do not think ultimate lows have been reached,” they wrote.

Next week, investors will focus on earnings results from major retailers including Walmart (NYSE:WMT) Inc and Home Depot Inc (NYSE:HD) as well as a report on monthly U.S. retail sales.

Whether clear signs of a bottom emerge or not, stock sentiment could also be swayed by market expectations of how aggressively the Fed will need to raise interest rates in the remainder of the year. The central bank has already raised rates by 75 basis points since March and has signaled that a pair of 50 basis-point increases may be coming in its next two meetings.

“I think you are going to have to at least wait for two or three 50 basis-point rate hikes before you start to see any real signs of people coming back in,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.

Rather than looking for signs of a bottom, Willie Delwiche, an investment strategist at market research firm All Star Charts, is focused on clearer indications that stocks can mount a sustained rally.

Among the factors he watches is whether the net number of 52-week highs versus lows on the New York Stock Exchange and Nasdaq combined turns positive, from current negative levels. Another is the percentage of S&P 500 stocks making 20-day highs rising to at least 55% from less than 2% at last count.

“Too many people right now are trying to pick a bottom and that’s proving to be futile and expensive,” Delwiche said. “This is a risk-off environment … Moving to the sidelines, letting the volatility play out, makes a lot of sense for investors.”

Stock Markets

Hyundai Motor Group to invest more than $10 billion in U.S. up to 2025

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3/3

© Reuters. Hyundai Motor Group Chairman Euisun Chung delivers remarks along with U.S. President Joe Biden on the automaker’s decision to build a new electric vehicle and battery manufacturing facility in Savannah, Georgia, as Biden ends his visit to Seoul, South K

2/3

By Heekyong Yang

SEOUL (Reuters) -Hyundai Motor Group said on Sunday it would invest an additional $5 billion in the United States by 2025 to strengthen collaboration with U.S. firms in advanced technology.

The investments, announced during a visit to Seoul by President Joe Biden, are for robotics, urban air mobility, autonomous driving and artificial intelligence, the group said.

Hyundai Motor Group, which houses Hyundai Motor Co and Kia Corp, on Friday announced plans to invest $5.5 billion in Georgia to build electric vehicle (EV) and battery facilities.

The new investment brings its planned U.S. total through 2025 to about $10 billion, above the $7.4 billion it announced last year.

The world’s third-biggest automaker by vehicles sales did not say where in the United States the additional $5 billion would be invested.

“Thanks to Hyundai, we are being part of this transformative automobile sector and accelerating us on a road where we’re going to be handing to United States of all electric future,” Biden told a news conference.

Standing next to him after a meeting, Hyundai Motor Group executive chair Euisun Chung said, “I am confident that this new plant in Georgia will help us become a leader in the America automobile industry with regards to building high quality electric vehicles for our U.S. customers.”

Hyundai’s new EV and battery manufacturing facilities will be based in the southern “right to work” state, where labour unions are less prevalent and cannot require workers to join.

Biden, a Democrat, has described himself as the most pro-union president in history. But the deal, announced by Georgia’s Republican governor, showed the compromises the president may have to make as he woos investment overseas.

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Stock Markets

Analysis-Tesla brand threatened by Musk harassment claim, criticism of Democrats

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3/3

© Reuters. FILE PHOTO: Tesla CEO Elon Musk speaks about new Autopilot features during a Tesla event in Palo Alto, California October 14, 2015. REUTERS/Beck Diefenbach

2/3

By Hyunjoo Jin and Paul Lienert

(Reuters) – Elon Musk has made a name for himself and Tesla (NASDAQ:TSLA) by breaking the rules, but the billionaire’s latest comments on politics and a claim of sexual harassment against him that he said is untrue may hurt the brand in the eyes of some car owners and employees.

Musk on Thursday denied a report by Business Insider that he sexually harassed a flight attendant on a private jet in 2016, calling the person who made the claim a liar.

The previous day, the Tesla chief executive, in the midst of a contentious effort to buy Twitter Inc (NYSE:TWTR), said he would now vote Republican instead of Democrat and called the Democrats a “party of division and hate.”

Tesla also was cut this week from the widely followed S&P 500 ESG Index, which an index executive said was due to issues including claims of racial discrimination within the company and crashes linked to its vehicles.

Musk responded by calling such ratings around environmental, social and governance (ESG) issues a “scam,” and questioned how the index could drop an electric car firm while adding oil and gas producers.

Tesla could not immediately be reached to comment.

While Musk has made attention-grabbing headlines before – once calling one critic a “pedo guy” on Twitter – the latest controversies again raise the question whether his outspokenness will tarnish his likeability. And – since Musk is so closely tied to Tesla – whether that will that hurt the carmaker’s sales, especially in California.

The left-leaning state is Tesla’s largest market, accounting for nearly 40% of the company’s U.S. retail registrations last year, according to Experian (OTC:EXPGF) data. Tesla sales in California were up almost 70% in the year and it had a 6.5% share of all vehicles in the state, according to the California New Car Dealers Association.

#BoycottTesla was trending on Twitter on Friday and several people claimed they were canceling their car orders.

“In the past, I admired him for working to build a green business that’s transformational in energy use. But he is sadly becoming divisive as an attention seeking troll and I no longer trust that he is dedicated to the quality of his products. I will cancel my Tesla order,” said J Yeh, a Twitter user who describes herself as a lawyer who has lived in several cities including Los Angeles.

“You lost a potential customer,” a Twitter user named Ute Bauer from Germany said, adding in German: “To anyone reading this, cancel your orders.”

Reuters was unable to confirm if any Tesla orders had been canceled.

Many institutional investors may stand by Musk no matter what given the company’s strong performance, but that doesn’t mean some aren’t frustrated.

“They’re doing a lot of good things,” said Taylor Ogan, CEO of Snow Bull Capital, which owns Tesla shares. “It’s just disappointing when that is tainted by Elon Musk’s antics. Elon Musk is the best thing for Tesla and the worst thing for Tesla.”

One Tesla employee, who asked not to be identified, voiced frustration that Musk’s efforts outside Tesla appeared to be hurting the carmaker’s stock. “The company needs to do something to address the issue,” he said.

On Friday, Tesla shares dropped almost 9%, knocking about $66 billion off of Tesla’s stock market value and putting the stock at its lowest level since last August, with analysts citing “distraction risks” from the Twitter deal. Musk assured people on Thursday Tesla was constantly on his mind.

If discussion around water coolers at work focused on the sexual harassment claim against Musk rather than Tesla products, the end result could be “corrosive” for the Tesla brand, said John Smith, a former group vice president at GM who ran global product planning.

Tesla and SpaceX employees also could become “a little bit rattled and angry” because of Musk’s anti-Democratic party comments as technology company staff in California tend to be more liberal, said Jason Stomel, founder of tech talent agency Cadre.

Bill Nelson, administrator of NASA, which relies on Musk’s SpaceX to fly its astronauts to space, told Reuters on Thursday that Musk has a strong team of executives at the spacecraft maker and the agency’s partnership with the company was “going without a hitch.”

And Musk still has plenty of fans online. Twitter user @JVega103 said he was a Republican who owned a Tesla and just signed up for Tesla solar panels. “Thanks for everything you do,” the user tweeted.

That left some industry observers wondering whether Musk and Tesla would simply shake off these latest controversies, as they have in the past.

“Is Elon Musk now crazy, or crazy like a fox? He has earned the benefit of the doubt as he is often playing chess when the rest of us are playing checkers,” Northwestern (NASDAQ:NWE) University professor Erik Qualman said. “As Musk himself on ‘Saturday Night Live’ famously stated, ‘What, did you think I would be normal?'”

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Stock Markets

Hyundai Motor Group to invest $5 billion in U.S. up to 2025

Published

on

3/3

© Reuters. Hyundai Motor Group Chairman Euisun Chung delivers remarks along with U.S. President Joe Biden on the automaker’s decision to build a new electric vehicle and battery manufacturing facility in Savannah, Georgia, as Biden ends his visit to Seoul, South K

2/3

By Heekyong Yang

SEOUL (Reuters) -Hyundai Motor Group said on Sunday it would invest an additional $5 billion in the United States by 2025 to strengthen collaboration with U.S. firms in advanced technology.

The investments, announced during a visit to Seoul by President Joe Biden, are for robotics, urban air mobility, autonomous driving and artificial intelligence, the group said.

Hyundai Motor Group, which houses Hyundai Motor Co and Kia Corp, on Friday announced plans to invest $5.5 billion in Georgia to build electric vehicle (EV) and battery facilities.

The new investment brings its planned U.S. total through 2025 to about $10 billion, above the $7.4 billion it announced last year.

The world’s third-biggest automaker by vehicles sales did not say where in the United States the additional $5 billion would be invested.

“Thanks to Hyundai, we are being part of this transformative automobile sector and accelerating us on a road where we’re going to be handing to United States of all electric future,” Biden told a news conference.

Standing next to him after a meeting, Hyundai Motor Group executive chair Euisun Chung said, “I am confident that this new plant in Georgia will help us become a leader in the America automobile industry with regards to building high quality electric vehicles for our U.S. customers.”

Hyundai’s new EV and battery manufacturing facilities will be based in the southern “right to work” state, where labour unions are less prevalent and cannot require workers to join.

Biden, a Democrat, has described himself as the most pro-union president in history. But the deal, announced by Georgia’s Republican governor, showed the compromises the president may have to make as he woos investment overseas.

Continue Reading

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