While the Federal Reserve tightens at the doorstep, a so far not great earnings season, continued COVID 19 fallout and even some geopolitical worries have battered sentiment, here is Jefferies global equity strategist Sean Darby with another view:
Our sense is that equity markets are experiencing the proverbial shakeout.
Perhaps it should have happened in 4th Q 2021. Darby said that they were a quarter too early, adding that the team has been surprised to see how little discounting has taken place in view of a tighter cycle, as per Darby, in a note to clients.
He doesn't see much mainstream panic out there, but he said investors poured $8.73 billion into emerging-market themed equities and developed Europe last week.
The risk assets were already underperforming in biotech, SPACs in 2021, and the current de-risking has admonished both the more speculative areas and popular, high PE shares mostly in the U.S. credit spreads in the U.S. but have to adjust from record negative real levels, said Darby.
So OK, investors are getting a lot of money into Europe and EM, but when will the dip buyers make a dent in Wall Street selling? Our call of the day is from RBC head of US equity strategy Lori Calvasina and strategist Sara Mahaffy, and sees a contrarian buy signal on the horizon.
There was a piece of good news for stocks in our weekly indicators last week. Net bullishness on the AAII survey fell to - 25.7% last week, close to the pandemic lows - 29% said the pair. The bulls were in retreat, while bears have moved up but are not at past peaks, said Calvasina and Mahaffy.
The S&P 500 has been up 15% on average over the next 12 months, but first got there in mid March, they said. On a four week average, this indicator is at 8%, close to the 10% contrarian buy threshold below the 10% threshold, the S&P 500 has been up 15% on average over the next 12 months.
That same indicator was also cited by Yardeni Research Dr. Ed. Yardeni said the weekly bull bear ratio fell to 1.59 during the January 18 week from 4.00 at last year s peak during the July 13 week.
The BBR fell closer to 1.00 in the past, which has been a good buying indicator, as the market traded this past week. Yardeni said the market seems poised for a rebound after the end of the latest FOMC meeting and Fed Chair Jerome Powell's press conference on Wednesday.
Yardeni believes that the current panic attack began on Jan 5. When the Fed released the minutes of the December 14 -- 15 Federal Open Market Committee meeting, the current panic attack could linger for a while. The Fed had room to back off because inflation was so low during the previous three taper tantrums in the financial markets, and it did so to calm the markets. He said that is not likely to happen today because inflation is a serious problem.
Here s what is happening to bonds as the Fed tries to end the days of easy money, analysts say.
IBM will report after the close in what will be a huge earnings week, with Microsoft MSFT, Apple AAPL, Tesla TSLA, McDonald's MCD, and Robinhood HOOD among the names on tap.
An activist investor is set to push Peloton Interactive PTON, to fire its CEO and seek a sale, as shares have slumped in recent months. Another public relations disaster could be looming after a key Billions character was shown to have suffered a heart attack while using a Peloton machine.
Kohl's KSS shares were bought by activist hedge fund Starboard Value LP after a consortium backed by activist hedge fund Starboard Value LP offered $9 billion for the retail chain.
The Markit Manufacturing and Services purchasing managers indexes are due after the market opens, in a week that will bring us a Fed meeting and more inflation data.
A month-long COVID 19 lockdown on 13 million residents in Xian has been lifted by China, but anyone who buys anti-fever drugs will have to test for the disease. The World Health Health Organization's Europe director says the omicron coronavirus variant could bring an end to the epidemic in Europe.
And here s why El Salvadoran president is wearing a McDonald's uniform on his Twitter account, TWTR, following the recent plunge in the digital currency. It's been back to normal Monday with the price ofBTCUSD pushing further below $35,000.
Russian stocks RTS, are collapsing and the rubleUSDRUB are at a new low after the U.S. ordered families of its diplomats to leave Ukraine amid fears of an imminent Russian invasion. Another report said President Joe Biden could send U.S. troops to the Baltic states.
After selling last week, the stock futures ES 00, YM 00, NQ 00 are slipping in some bumpy premarket trading. European stocks, SXXP, are getting hammered and Asia markets are mostly lower. The yield on the 10 year U.S. Treasury TMUBMUSD 10 Y is down 3 basis points to 1.725%.
Here s what is happening to bonds as the Fed tries to end the days of easy money, analysts say.
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