By Yasin Ebrahim
Investing.com – The major averages retreated from record highs Monday, though gains in energy and consumer discretionary kept downside momentum in check ahead of data-laden week including a decision from the Federal Reserve on bond buying.
The fell 0.1% and hit an earlier all-time high of 4,619.20. The was up 0.1%, or 38 points after topping 36,000 for the first time ever. The Nasdaq climbed 0.37%, and had earlier notched a record of 15,531.0. In small caps, the , up 2.4%, remained on track for its best day in a year.
Energy was up about 1% as oil prices continued to rise amid expectations that the major oil producers are unlikely to turn increase production to alleviate the energy supply crunch.
Bank of America forecast to hit $120 a barrel by the end of June 2022 as the rebound in gasoline demand amid refining-capacity constraints could continue to support oil prices.
Devon Energy (NYSE:), Marathon Oil (NYSE:), APA Corporation (NASDAQ:) were among biggest gainers in the sector.
Consumer discretionary continued to add to gains from last week, led by Tesla (NASDAQ:) as the electric vehicle maker climbed to fresh record highs.
Casino stocks including Las Vegas Sands (NYSE:), Wynn Resorts (NASDAQ:), Melco Resorts & Entertainment (NASDAQ:) also lifted the sector, shrugging off data showing casino revenue in the Asian gambling mecca of Macau fell by 40% in the 12 months through October.
Tech, however, was a drag on the broader market as big tech started the week on the backfoot amid a rise in Treasury yields.
Apple (NASDAQ:), Google-parent Alphabet (NASDAQ:), Facebook (NASDAQ:), Microsoft and Amazon (NASDAQ:) were in the red.
The topped 1.6%, but pared some gains as U.S. manufacturing data continued to point supply-chain woes that aren’t expected to ease anytime soon.
“The manufacturing sector is growing, but it faces severe headwinds, which are unlikely to fade materially before next spring,” Pantheon Macroeconomics said in a note.
In other news, Coca-Cola Co (NYSE:) acquired Bodyarmor for $5.6 billion as the beverage giant’s history seeks to provide ramp-up competition against Gatorade, the leader in the sports drink market.
Harley-Davidson (NYSE:), meanwhile, jumped 9% after the U.S. and the European Union ended their dispute on steel and aluminum tariffs, mitigating the risk of the motorcycle maker incurring a 56% levy on its imports into the EU.
The grind higher on Wall Street comes just a day ahead of the Fed’s two-day meeting starting Tuesday, expected to culminate in an unchanged decision on rates and an announcement that the pace of bond purchases would be reduced by about $15 billion a month.
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Morgan Stanley: bear market rally to continue
One of Wall Street’s best-known bears, Michael Wilson, thinks the S&P 500 will rise another 7% before turning down, so the bear market rally will continue for now, writes Market Watch.
After the Dow Jones, S&P 500 and Nasdaq Composite joined their strongest weekly gains since at least May last Friday, Wilson, who is chief strategist and head of U.S. equity markets at Morgan Stanley (NYSE:MS), told clients that there could be another 5% to 7% before the downward trajectory of U.S. stocks resumes during the latest bear market recovery.
Wilson has held a bearish view of the stock market for about 2 years and correctly predicted a sell-off this year.
Wilson explained in a research note sent out to clients on Monday that a pullback in the 38-50% drop in the stock market this year “would not seem like something unnatural, not consistent with the previous bear market rally.”
While growth concerns have triggered a sell-off in commodities and lowered inflation expectations, the fact that the U.S. economy is already slowing and heading toward recession means that any market rally is likely to be short-lived, and U.S. stocks are likely to eventually fall.
Wilson mentioned in the note that the bear market is not over yet, although it may appear otherwise in the next few weeks as the market takes the rate cut as a sign that the Fed can still manage a “soft landing” and prevent a meaningful revision to earnings forecasts.
U.S. stocks rose last week as investors now hope the slowing economy and falling commodity prices may inspire the Fed to raise interest rates less sharply. Federal funds futures, a derivative used by investors to bet on the pace of the Fed’s monetary policy changes, estimate with a high probability that the Fed will be forced to start cutting interest rates again as soon as next summer.
They also consider the lower peak in the federal funds rate: it will peak around 3.5% at the end of 2022 instead of 3.75% just a couple of weeks ago. Wilson also pointed out the drop in Treasury yields: the 10-year Treasury bond yield went from 3.230% to a low of 3.07% on Friday before rebonding again on Monday.
Wilson expects the S&P 500 index to fall to around 3,400 points if the U.S. Federal Reserve manages to get a “soft landing” for the economy — which Fed Chairman Jerome Powell said last week would be “a very difficult thing to do.”
Wilson expects that if the U.S. economy plunges into recession, the S&P 500 index will fall to around 3,000 points. In any case, Wilson believes that U.S. stocks are still highly valued because the risk premium — that is, the measure of compensation that investors receive for the extra risk of owning stocks instead of bonds — remains about 300 basis points higher than the 10-year Treasury bond yield, which is considered a “risk-free rate.”
Easing chip shortages to help Volkswagen in H2 – CEO
© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo
BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.
“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.
This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.
“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.
Reliance Chairman Mukesh Ambani steps down as director of telecom arm
© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas
BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.
Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.
India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.
Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.
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