Expect more mayhem as the market parses every new piece of information, grasping for something solid, moving with whatever data eases or engenders recession fears. Corporations were able to jack up prices over the past three years to pad record profits, but consumers are getting choosier about what they spend their money on, sometimes shifting to cheaper products. This is causing trouble for some brands that pushed their prices too far. Starbucks, which raised prices over the pandemic, missed earnings in the second quarter. McDonald’s, which has raised prices by a whopping 40% since 2019, also whiffed.
Risk of a hard landing is rising, but it’s still not the base case: Capital Economics
”We’re not seeing a ton of demand for downside protection,” Mandy Xu, Cboe’s head of derivatives-market intelligence, told me at the end of last month. She added that, for the most part, Wall Streeters were making a lot of bets that the market would go up. The inclusion of a company in the Dow Jones Industrial Average does not depend on defined criteria. Instead, an independent Wall Street Journal commission decides whether a share is to be included or excluded. There are no fixed times for reviewing the composition of the index, since changes are only made by the commission as and when they are needed.
The S&P 500 is set to fall more than 1% for a third straight day — what history says
As for further swings in stocks, Bank of America says look for further moves based on the data this week, with a soft CPI reading likely to spark a relief rally. However, the risk of a “major downside event” is possible if the data is hotter than expected. Investors should start preparing for a stock-market correction as uncertainty surrounding U.S. politics, corporate earnings and Federal Reserve policy starts to weigh on the market, according to Morgan Stanley’s Michael Wilson. The yield on the 10-year Treasury note fell less than 1 basis point, to 4.267%. Those are the lowest closing levels since June 25 and June 27, respectively, according to Dow Jones Market Data. The risk of a hard landing stands at around 27%, while a soft landing is still the most likely outcome, with the chances around 38%, Brown wrote in a note on Monday.
- After years of weird times and outsize gains, Wall Street is dancing on a knife’s edge.
- The S&P 500 opened 4.2% lower and bounced back a little in the hours that followed.
- Any softness in the inflation data could be a welcome sign for the stock market, he added.
- For example, in the three months heading into the 2008 election, the S&P 500 dropped 24.8%.
- However, the market can get it wrong, too, with the 2020 presidential election being a prime example.
Stock Market Today: Dow closes down 1,000 points as global equity rout continues
The main reason for the market’s tranquility this year was the strong conviction that America’s battle with inflation would end with a soft landing, an ideal scenario where prices come back under control without a surge of job losses. If you dig deeper into recent economic data, there’s a strong case for the US being in a kinder, more forgiving slowdown. The July jobs report showed wage growth at 3.6% year over year, meaning people are still getting raises even when adjusting for inflation.
A cooling economy and slowing inflation may support small-cap stocks
The index would have to fall to 4,972.30 today to trigger a circuit breaker. The RSI of Microsoft’s stock was last at 24.68 according to FactSet, on track for the first close below 30 since Sept. 30, 2022, and at the lowest level seen since it was at 21.82 on Aug. 25, 2015. With Microsoft’s stock shedding 3.3% on the day, and 7.4% amid a five-day losing streak, it is now the most oversold its been by one key technical metric than it has been in nine years. The Dow Jones Industrial Average fell 1,080 points, or 2.7%, to around 38,657, on pace to record its largest point and percentage decline since Sept. 13, 2022.
Stocks likely headed for a 10% pullback in the third quarter, Morgan Stanley’s Wilson warns
The consumer price index continued its downward trend in June, coming in at 3%, just above the Fed’s 2% target. Fewer and fewer Americans quit their jobs as they became less confident that they’d immediately find new ones. The sudden reassessment after the jobs report not only caught many investors on Wall Street offside but changed the entire market’s tenor — bad news is now bad news. A slowing economy is what policymakers and investors wanted to see, but not one so slow that it could hurt the jobs market or, in the worst case, tip the economy into a full-on recession. The question is whether we are in the former kind of slowdown and not the latter.
McIntyre said he will be watching the consumer-price index numbers due out Thursday — and especially data about the core CPI — to get more clues on whether the Fed will start cutting its key interest rate as early as September. Any softness in the inflation data could be a welcome sign for the stock market, he added. On the flip side, when the stock market printed a negative return in the three months leading up to the election, the incumbent party lost the election 89% of the time.
Trump media dropped 5% yesterday after the former president returned to X, and dipped almost 4% Tuesday after Trump’s interview with Elon Musk. Potential resistance starts at the top of the April 26 down gap at the April 25 low of $34.50, followed by the 200-day moving average, which currently extends to $38.89. However, closing below Friday’s high of $32.34 but would the new bullish view in doubt. Now, pullbacks into Monday’s gap-up zone would like draw out buying by bears looking for an escape, while further gains could trigger stop-loss buying.
Added on top were concerns about Big Tech, the backbone of 2024’s roaring market. After wrapping up earnings season with little profit to show for investments in AI, worries that companies wasted $1 trillion on this nifty but unproven tech went from whispers to open debate. This week, traders will be looking for signals in the latest updates on the economy. On Tuesday, data on wholesale inflation will be released, though the main event for the week will be consumer inflation data on Wednesday with the consumer price index report for July. A cooling economy and slowing inflation could provide a good setup for a broadening of the stock-market rally by the end of the year, he noted. Gold prices fell sharply Monday after ending last week at their highest level since May, as a “mix of factors” look to create uncertainty for the precious-metals market, said Adam Koos, president at Libertas Wealth Management Group.
Shares of CrowdStrike Holdings Inc. were up more than 1% in Monday afternoon trading, bucking the market’s downward action. U.S. stocks were sharply lower, drifting back toward the lower half of the day’s range, in the final hour of trading on Monday. There have been eight such streaks of three or more 1%-plus declines over the last decade. On average, the S&P 500 was down 1% a week later but tended to be higher a month, three months later.
Third is Monday’s gap-up rally, as the intraday low of $32.82 was well above Friday’s high of $32.34. In 16% of the years since 1945, the S&P 500 recorded a pullback of less than 5%. For the remaining 84% of the years, the average correction in the second half of the year was more than 12%, according to Horneman. The Nasdaq Composite went up 50.98 points or 0.3% to close at 18,403.74, a record high. The S&P 500 opened 4.2% lower and bounced back a little in the hours that followed.
Major stock market indexes fell sharply on Monday, leaving some traders wondering if a circuit breaker could be triggered. A soft landing refers to a scenario where inflation cools but the economy avoids a recession. In contrast, in a hard-landing scenario, the economy would go into a recession following the series of interest-rate hikes by the Federal Reserve, which were aimed at controlling inflation. Specifically, he highlighted the stock market’s performance in the three-month window before election day as the ultimate predictor of who will win the presidency. US stocks were lower on Monday ahead of new economic data as investors struggled to extend a rebound and completely erase all of the losses from last week’s big sell-off. The Dow Jones Industrial Average lost 1,033.99 points, or 2.60%, to end at 38,703.27 on Monday, recording its largest point and percentage decline since Sept. 13, 2022, according to Dow Jones Market Data.
Ten- and 30-year Treasury yields finished lower on Monday amid investors’ ongoing flight to safety into the long end of the U.S. government-debt market. “The ones that are doing well on pricing power are doing well. The ones who are not are getting crushed for missing estimates,” he told me. “Companies that benefited from the inflation wave are no longer benefiting.” No matter where the economy goes, Wall Street is entering a prolonged period of chaos. The rally has produced an “island reversal” chart pattern that could lead many to believe the stock has already bottomed, and a medium- to longer-term uptrend may have already started. A correction usually refers to a market decline that is more than 10%, but less than 20%, from a recent high.
According to the CME FedWatch Tool, markets see almost even odds of a 25 basis point or a 50 basis point cut at next month’s policy meeting. A slight month-to-month increase wouldn’t be enough to disrupt the outlook for rate cuts next month, market experts say, and the only debate in markets seems to be how big of a rate cut will be delivered. On an annual basis, inflation is expected to show prices rose 3% last month, in-line with June figures. Megacap tech company Nvidia Corp. was up more than 2% Monday afternoon, while Apple Inc. rose 0.3%,FactSet data show, at last check.
Fed Chairman Jerome Powell is likely to step in to boost the economy in September. And it is probable that the recent weakness in the job market is just a level setting back to a more sustainable existence. But even a little doubt can be pernicious for finance, a world ruled by probabilities. After a rather long absence, fears that the US economy could tip into recession came back into view, which caused the people of markets — from the macro traders to the stock jockeys — to panic.
Megan Horneman, chief investment officer at Verdence Capital Advisors, said she would not rule out a correction in the S&P 500 in the second half of the year. A circuit breaker will be triggered if the S&P 500 falls 7%, 13% or 20%. Circuit breakers are built into the market structure and temporarily halt trading across exchanges when a specific security or market index moves too quickly.