Stocks head for another potentially treacherous week, after S&P 500 falls into bear market territory
Traders are seen on the New York Stock Exchange’s floor in Manhattan, New York City. March 7, 2022.
Andrew Kelly | Reuters
A stock market that is already struggling could see more negative news from retailers over the next week.
Although market professionals are looking out for additional signs that stocks may be bottoming soon, strategists caution that it is still a risky prospect. This is the S&P 500, on an intraday basis, fell into a bear market for the first time Friday — trading more than 20% below its record high reached in January.
It’s a continuous process. … It was scary to break through the bottom of last week’s. These things are not easy to do,” explained Julian Emanuel from Evercore ISI, who is head of equity and derivatives strategy. Emanuel stated that buying at the bottom could provide a purchasing opportunity. However, the market may also move lower. We continue to expect higher stock prices in the medium- to long term. This is towards the end of this year.
The S&P 500 also dipped below its closing record high of 3,837.24. Wall Street analysts would call it a bear Market if the benchmark closes below 3837.24.
Although there’s no definitive definition of a bearish market, traders use the 20% mark to help them understand why stock markets are falling. However, they emphasize that the economic performance will determine the extent and how far stock markets could fall.
The whole issue comes down to whether there will be a recession. Emanuel explained that the decline in bear markets with no recession was 21.3%, and they are now basically at the same level.
He said that the average drop in the bear market was 47.9% during recessions. These bear markets occurred in 2000, 2008, and 2020. Emanuel stated that Evercore doesn’t expect to see a recession but clients do now anticipate a 55% chance in the next 18-months.
Stocks dropped sharply over the last week despite the fact strategists had been expecting the oversold market to bounce.The initial rally in the market was followed by earnings disappointments. WalmartAnd TargetThe gains were exploding.
Surprise weakness among these two major stalwarts retailers wiped out their stocks and decimated the retail sector. took the entire market lower fears the consumer is wobblingOther companies may also experience earnings problems.
Earnings Starting at Costco, Best BuyAs investors assess how hard the consumer is falling behind, this data could also be of value to them. This includes information on income, inflation and spending.
Emanuel stated that any retailer reporting in such an environment was a cause for investors to be afraid, given the events of this week.
Others retailers that will be reporting earnings over the next week are Ulta Beauty, Macy’s, Dick’s Sporting GoodsDiscounters Dollar TreeAnd Dollar General. The comments and reports could clarify whether or not the general consumer is weakening. It also may reveal how much inflation continues to affect the supply chain and impact the economy.
Target and Walmart released the reports at the same time that Target’s was also reporting a strong market. April retail sales report,Spending rose 8.2% from year to year, according to the data.
The Federal Reserve minutes of its previous meeting will be available on Wednesday. Thursday’s second quarter GDP look will also be included in the Economic Calendar. Friday’s PCE data is expected to follow. The Fed monitors closely the PCE inflation rate.
“We are likely to switch gears in order to concentrate on economic data. Art Hogan is National Securities’ chief market strategist. We receive the April reading on new home sales. It looks down, but it doesn’t seem as bad as April. “We receive durable goods. That’s expected to increase as well. Consistent is one thing: the economic calendar and data have been better than market reactions to them.
Stocks took a battering in the past week, with the S&P 500 down 4.5% as of Friday at afternoon. As tech giants and big-cap companies crashed, the Nasdaq fell 5.6%. Apple lost more than 8.8% and Tesla dropped more than 15.6%.
Strategists were watching to see if the S&P 500 would hold onto the low it set in the prior week at 3,859. The S&P 500 initially maintained that level on Friday but it then fell sharply.
Scott Redler, Partner at T3Live.com, said, “This is where you can go short and lose money.
Redler stated, “I have already invested extra money in the long-term,” and he will not continue to do so unless we get to a better spot. There are many potholes in trading. There are only two additional Fed rate hikes. It is hard to be enthusiastic here.
This month, the Fed increased interest rates by half percent. However, it is widely believed that they will make at least two further 50 basis points increases before returning back to quarter-point moves. A basis point equals 0.01.
Emanuel stated that investors need to remain cautious. Emanuel stated that this environment requires you to search for every edge you can. These include projected earnings growth, lower multiples and high levels of short interest. A stock with a high short-term position means that investors are expecting the stock’s price to drop. Any price movement higher could cause those investors to take out shorts and propel the stock price up to greater heights.
Emanuel also said that he enjoys value-named products. Emanuel stated that long-term, value names are very profitable. Emanuel said that people are not investing enough in value stocks. He also stated that they are an insurance against rising rates and inflation.
Week ahead calendar
Earnings: Zoom VideoAdvance Auto Parts
12:00 PM Atlanta Fed President Raphael Bostic
9.45 AM Manufacturing PMI
9:00 a.m. PMI Services
10:00 a.m. New home sales
8:30 a.m. Durable goods
Minutes of the FOMC at 2:00 PM
Earnings: Costco, Macy’s, Autodesk, Gap, Dell Technologies, Dollar Tree, Dollar General, Ulta Beauty,Baidu, VMware and Lions Gate Alibaba, Medtronic, Burlington StoresAmerican Eagle Outfitters. Toronto Dominion. Jack in the Box. Buckle, Workday, Sumo Logic
8.30 a.m. Jobless claims
8:30 a.m. Real GDP (Q1 second estimate)
10:00 a.m. Pending home sales
8:15 a.m. Economic indicators
8:30 a.m. Wholesale Inventories
8:30 a.m. 8:30 a.m.
8:30 a.m. PCE deflator
11:00 a.m. University of Michigan consumer sentiment