In the first week of May, The S&P500 was down by only 0.2%. However, the atmosphere on markets is a bit depressing. Probably because the US Nasdaq lost more than 5% in the wake of the Fed's big monetary tightening. But since it had gained about the same amount over the previous three sessions, the picture is not as black as it seems.
The underlying trend still remains negative for the US technology index, which has sunk to its lowest levels of the year. It is at -22.22% since January 1, while the Dow Jones limited its losses to 9.5%. The difference between the two is that the Nasdaq 100 is dominated by technology (Apple, Microsoft, Amazon, Tesla, Alphabet and Meta make up 44% of the index), while the three biggest influencers of the Dow Jones are, in order, UnitedHealth (an insurer), Goldman Sachs (a bank) and The Home Depot (a retailer of home products and materials). The Dow's calculation may be archaic (it's based on stock prices, not capitalization), but it shows how much technology and, to a lesser extent, consumer discretionary are weighing on the trend.
Bank of America just remined us in a note that the market has experienced 19 bear markets in 140 years. A bear market is a phase in which the indices lose at least 20%. An average bear market lasts 289 days and results in a 37.3% decline. The US bank points out that by applying this average, the bottom is expected to be reached on October 19, 2022 with an S&P500 at 3,000 points and a Nasdaq at 10,000 points. Well, it's mostly for fun, admits Bank of America, which nevertheless concedes that many stocks are already in panic mode, since 49% of Nasdaq stocks have already lost 50% on their records. "The good news is that bear markets are shorter than bull markets," concludes the bank…
This week, investors will focus on the April US consumer price index, which will be announced on Wednesday. Economists believe that inflation peaked in March and that it should begin to decline. If this is not the case, nervousness could increase and the assumption that the pace of rate hikes will accelerate would be reinforced. If easing is confirmed, discussions would surely focus on the pace of normalization, which could be slow, but would keep the stock market flame burning.
Economic highlights of the day:
No major indicator today. Today, China announced a sharp slowdown in exports.
The USD/EUR pair remains around EUR 0.9496. Gold is trading at EUR 1865. Oil remains firm, with North Sea Brent crude at USD 109.0 per barrel and U.S. light crude WTI at USD 105.82. The yield on 10-year US debt continues to rise to 3.12%. Bitcoin is retreating below USD 32,902.
* Apple and Tesla are down 1.7% to 2.4% in pre-market trading in the wake of Taiwanese outsourcer Quanta Services, whose business in China is affected by the resurgence of the COVID-19 epidemic.
* Twitter - Elon Musk, who has reached an agreement to buy Twitter for $44 billion, wants to increase the social network's annual revenue fivefold to $26.4 billion by 2028, the New York Times reported Friday, citing a document submitted by the Tesla boss.
* Uber Technologies will cut hiring and spending on marketing and grants, CNBC reported, citing a letter from the group's chief executive, Dara Khosrowshahi, to his employees. The stock is down 2.5% in pre-market trading.
* Rivian stock plunges 7.6% in pre-market trading after Ford sold eight million shares of the electric vehicle maker's stock as the post-IPO lock-up period expired Sunday, CNBC reported, citing sources.
* Cryptocurrency-related stocks are down in pre-market trading amid risk aversion over fears about rising rates and economic slowdown.
* Lockheed Martin plans to nearly double production of Javelin missiles, an anti-tank weapon used by Ukrainian forces against Russia since the country's invasion, group chief executive James Taiclet said Sunday.
* Southwest Gas Holdings reached a deal with Carl Icahn on Friday after months of battle that resulted in the group's chief executive being replaced and the billionaire investor being given four seats on the board.
- BankUnited: Piper Sandler downgrades to underweight from neutral. PT up 3.5% to $41.
- Boohoo: Societe Generale upgrades from buy to hold, targeting GBp 72.
- Cigna: Cowen raised the recommendation to outperform from market perform. PT up 23% to $329.
- Dish: Credit Suisse upgrades to outperform from neutral. PT jumped 103% to $45.
- Floor & Decor Holdings: Gordon Haskett cuts to accumulate from buy, price target to $90 from $100
- iHearthMedia: J.P. Morgan downgrades to neutral from overweight. PT rises 36% to $19.
- Lowe's Companies: Gordon Haskett downgrades to accumulate from buy, adjusts price target to $225 from $255.
- Match Group: Wells Fargo Securities upgrades to overweight from equal-weight. PT rises 55% to $115.
- Progressive: Morgan Stanley upgrades to equal-weight from underweight. PT up 5.1% to $115.
- RH: Gordon Haskett lowers to hold from accumulate, price target to $330 from $465.
- Shopify: Wedbush further cuts price target to $538 from $630 amid slowing growth, keeps outperform rating.
- Simmons: Piper Sandler downgrades to underweight from neutral. PT up 4.3% to $26.
- Tractor Supply Company: Gordon Haskett cuts to accumulate from buy, price target to $230 from $260.
- Williams-Sonoma: Gordon Haskett downgrades to Reduce from Accumulate, price target to $130 from $200