(Bloomberg) – Stocks fell as a gloomy outlook for another giant chipmaker added to recession fears, with many traders unwilling to make risky bets ahead of Wednesday’s pivotal inflation reading.
Bloomberg’s Most Read
A rally in the S&P 500 from its June lows hit a wall amid a fourth straight day of losses. The Nasdaq 100 underperformed as Micron Technology Inc.’s warning showed more evidence of collapsing chip demand. All 30 companies in the Philadelphia Semiconductor Index fell. In late trading, Coinbase Global Inc., the largest US cryptocurrency exchange, sank on disappointing earnings.
Investors have become more cautious in anticipation of July’s consumer price index, which is expected to slow down a bit but remain at elevated levels. The report comes on the heels of recent employment figures pointing to solid wage growth and productivity data in the United States pointing to a new spike in labor costs that could further complicate the Federal Reserve’s efforts. to control inflation.
“A hotter-than-expected CPI report will put pressure on markets this week. An online report could be factored in on the heels as investors priced a 75 basis point move from the Fed” in September,” wrote Lindsey Bell, chief markets and monetary strategist for Ally. “Anyway, we still have to go through another jobs report, more inflation data and Jackson Hole before we start. arrive at the Fed’s September meeting. This could be volatile several weeks in advance.
Timing the peak of inflation isn’t easy, especially after June’s CPI print turned out to be hotter than expected, but getting it right has brought investors a big return.
Those who buy the S&P 500 during major inflation spikes dating back to 1940 have seen the index post an average rise of 16% over the next 12 months, according to data compiled by Leuthold Group. A big caveat is this: the price-earnings ratio averaged 12.7 in previous cases on a normalized basis, compared to over 20 now.
Read: Strategists under the same roof clash on the S&P 500 ahead of CPI data
The highly optimistic recommendations from analysts send a warning signal for stocks, according to Citigroup Inc. strategists led by Robert Buckland. An index of global sell odds “returned to bullish levels reached in 2000 and 2007, after which global equities halved,” they wrote.
Strategists at Morgan Stanley and Goldman Sachs Group Inc. have previously warned that analysts’ expectations are unrealistic. Meanwhile, JPMorgan Chase & Co.’s Marko Kolanovic, one of Wall Street’s staunchest bulls, said investors should trim their stock holdings slightly after stocks outperformed other assets amid a downturn. receding fears of recession.
“Near the mid-June lows, we discussed that we would not sell equities given that markets were already pricing in a lot of bad news. However, with the strong rebound in equities since then and our view that the short-term upside is capped, the risk/reward ratio looks less favourable,” said Keith Lerner, chief market strategist at Truist Advisory Services.
Other company highlights include surging shares of memes like Bed Bath & Beyond Inc. and GameStop Corp. exploded. Novavax Inc. fell as the drugmaker slashed its revenue forecast as disappointing demand for its Covid-19 vaccine dragged rivals in the market. Boeing Co. delivered 23 of its 737 Max jetliners and three freighters in July, compared to 51 total commercial jet deliveries in June.
Read: DOJ set to sue Google in ad market as early as September
Elsewhere, Bitcoin resumed its slide, ending a four-day winning streak as volatility continued to plague the crypto world.
What to watch this week:
US CPI data, Wednesday
Chicago Fed President Charles Evans and his Minneapolis counterpart Neel Kashkari are scheduled to speak on Wednesday
US PPI, first jobless claims, Thursday
San Francisco Fed President Mary Daly is interviewed on Bloomberg Television on Thursday
Euro zone industrial production, Friday
American University of Michigan Consumer Sentiment Friday
Respected for decades for its combination of decent returns and relatively low volatility, the 60/40 Portfolio has generated an 11.5% loss so far this year. Is it time to put the strategy to rest or does it just need some tweaking? Have your say in the anonymous MLIV Pulse survey.
Some of the major movements in the markets:
The S&P 500 fell 0.4% at 4 p.m. PT
The Nasdaq 100 fell 1.1%
The Dow Jones Industrial Average fell 0.2%
The MSCI World index fell 0.5%
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0208
The pound was little changed at $1.2073
The Japanese yen fell 0.1% to 135.13 per dollar
The yield on 10-year Treasury bills rose three basis points to 2.79%
Germany’s 10-year rate rose two basis points to 0.92%
The UK 10-year yield rose two basis points to 1.97%
West Texas Intermediate crude fell 0.1% to $90.63 a barrel
Gold futures rose 0.3% to $1,811.10 an ounce
©2022 Bloomberg LP