- The main American indexes fall; Nasdaq down about 2.5%; chips, weaker FANGs
- Comm svcs weakest S&P major sector; sheath sole staples
- The dollar, the bitcoin, the gold fall; coarse
- The 10-year US Treasury yield rises to ~1.83%
February 3 – Welcome home to real-time market coverage from Reuters reporters. You can share your thoughts with us at [email protected]
THE TRADING VS. INVESTMENT BATTLE RAGES ON (1345 EST / 1845 GMT)
Market dips can be disconcerting. In fact, Scott Wren, senior global market strategist at the Wells Fargo Investment Institute (WFII), says they can sometimes force nervous investors to run for the hills, rather than seeing them as opportunities.
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According to Wren, since the S&P 500 (.SPX) recently broke below its closely watched 200-day moving average on Jan. 21 and then subsequently recovered on Jan. 31, it’s been a battle for profit-seeking traders. short term. and investors taking advantage of the weakness to step in and buy stocks.
Traders have their place, Wren said in a note Wednesday, but a key piece of the puzzle on market pullbacks hinges on your outlook for the future, and WFII remains “positive.”
Looking to the 2022 outcome, WFII forecasts good economic growth, decelerating inflation, improving labor markets and strong growth in corporate earnings. Therefore, WFII wants to “step in and be buyers when the stock market corrects.”
Given this outlook, Wren continues to recommend both technology and communications services for “the quality and growth components of portfolios.”
Additionally, says Wren, investors can look to increase their exposure to two cyclical sectors: financials and industrials. When it comes to fixed income, Wren says he favors municipal bonds and preferred stocks.
“In the current environment, expect more days where trader-driven volatility is met with buying from longer-term investors looking to take advantage of opportunities. We recommend being a long,” said.
SICK OF OMICRON? FRIDAY JOBS REPORT WILL ALSO BE (1228 EST / 1728 GMT)
A sharp rise in the number of people calling sick of the Omicron variant early last month could skew the January nonfarm payrolls report lower when it is released on Friday.
Morgan Stanley forecast a loss of 215,000 jobs, a substantial downward revision to its previous forecast in what would be the first drop in the monthly U.S. jobs report since December 2020.
A Reuters survey shows economists expect 150,000 jobs were created in January.
Strong gains in the household survey should help the Federal Reserve view January data as a one-time event as policymakers said a bad month did not change the policy path, MS said in a rating.
Job losses expected to be concentrated in Covid-sensitive leisure and hospitality sectors; trade, transport and public services and disproportionately in sectors that employ a high share of hourly-paid workers, MS said.
Investors may have to wait until February’s report until early next month to better gauge labor demand and the underlying health of the jobs market, said Joe LaVorgna, chief economist for Americas at Natixis.
The January jobs survey week began a day before the Census Bureau’s Household Pulse Survey ended, LaVorgna said. The pulse survey showed that more than 14 million Americans did not work from Dec. 29 to Jan. 10, he said.
“Given the large number of people affected, delivering a verdict on the health of employment in January may be nearly impossible,” LaVorgna said in a note.
EUROPE FALLS ON ECB HAWKISH ‘PIVOT’ (1157 EST / 1657 GMT)
Well, it had to happen one day!
With inflation above 5% in the Eurozone, it was only a matter of time before the European Central Bank woke up and smelled like coffee like the BoE and Fed did some time ago. .
Nothing in particular was expected from today’s central bank meeting, but by refusing to reiterate that a rate hike was unlikely this year, the ECB’s Lagarde marked a real turning point.
Eurozone money markets rushed to price in a nearly 100% chance of 40bp hikes by year-end, up from a 90% chance of 30bp hikes ahead of the Lagarde press conference.
“President Lagarde at today’s press conference clearly signaled a shift from a slow, calendar-based guidance to something much more active,” Deutsche Bank analysts commented shortly after the presser. .
Conclusion? “buy EUR/USD” said the investment bank and traders did!
The euro is currently up 1.25% against the dollar, its biggest jump since November 2020, and the Bund’s yield has taken its biggest jump since the March 2020 stock market crash.
At 0.15%, the yield on the German 10-year government bond is at a level not seen since 2019 and after nearly three years in negative territory.
There was also plenty of action in the Old Continent equity market, with the pan-European STOXX losing a hefty 1.8% as investors adjusted to what looks like the start of a new cycle.
European tech stocks, struggling to recover, were hit in the head and lost 3.4%. That took the sector’s index 19% off its November highs.
At the other end of the trade tightening, European banks had a very volatile session, but came in the dark with a 0.2% rise.
Q1 US PROFIT EXPECTATION DECREASES AS OUTLOOK TURNS MORE NEGATIVE (1107 EST / 1607 GMT)
Analysts’ forecasts for S&P 500 earnings in the first quarter are easing as the negative-to-positive outlook ratio for the quarter increases.
“Growth is slowing and the outlook provided by the companies after release is slightly more negative than three months ago,” Nick Raich, CEO of The Earnings Scout, wrote in a note Thursday.
About halfway through the fourth-quarter 2021 earnings season, analysts cut their expectations for first-quarter earnings growth to 6.8%, from 7.5% on Jan. 1, according to IBES data. from Refinitiv.
At the same time, earnings estimates for the fourth quarter of 2021 are rising, reflecting a typical trend in earnings reporting where company results for one quarter mostly beat analysts’ estimates, but they offer more cautious guidance for the future. next quarter.
The negative outlook, however, is up from recent quarters. So far, the negative outlook for S&P 500 companies for the first quarter has outnumbered the positive outlook by a ratio of 3 to 1. This ratio for the previous four quarters averaged only 1 to 1, based on a full season outlook. The longer-term ratio is 2.5 to 1, based on data from Refinitiv.
NASDAQ SLIDE AS FACEBOOK FACEBOOK (1015 EST/1515 GMT)
U.S. stock indices are down on Thursday, with the Nasdaq (.IXIC) plunging about 2%, as gloomy forecasts from Facebook-owner Meta Platforms (FB.O) rocked the wider tech sector and threatened disrupt a nascent stock market recovery.
Meta Platforms shares (FB.O) are being planted. The stock loses about a quarter of its value. With that, the communication services sector (.SPLRCL) is the weakest major sector of the S&P 500 (.SPX) on the day. The FANG stock market index (.NYFANG) lost more than 3%.
It should be noted that while all major S&P 500 sectors are down, six of the 11 groups are down less than 1%, with financials (.SPSY) now slightly negative.
The S&P 500 Banks Index (.SPXBK) is positive. This, with the 10-year US Treasury yield reaching the 1.85% zone.
Here is where the markets are at the start of the session:
WELCOME TO THE META-REVERSE, AKA THE FACEBOOK FOLLIES (0900 EST/1400 GMT)
With CME e-mini Nasdaq 100 futures slipping more than 2.5%, weighed down by a pre-market drop of more than 20% from Facebook-owner Meta Platforms (FB.O), the Nasdaq Composite (. IXIC) looks set for a reversal lower on the open.
This, after the IXIC rallied as much as 11% from its January 24 intraday low, including four consecutive days of gains through Wednesday’s close:
Despite the composite rising, it failed to break above resistance at its January 10th low (14,530.226) on Wednesday. The IXIC stalled just before this level, hitting 14,504.816, before pulling back. Read more
Meanwhile, even with the recent rally, momentum is struggling. After falling to around 16, its most oversold level since October 2018, the daily RSI is struggling to muster enough strength to reclaim the 70.00 overbought threshold. It ended Wednesday at 53 and looks set to retire when it opens.
In case of weakness, the IXIC high from January 26th at 14,002 can now attempt to serve as support. Breaking this level could see the index threaten, and potentially breach, its January 24th low of 13,094.
Next support is at the May low at 13,002. March lows and the 38.2% Fibonacci retracement of the entire advance from March 2020 to November 2021 are found at 12,786, 12,552 and 12,397.
In the event the Nasdaq tests or breaks its January low, traders will be watching to see if the IXIC’s daily RSI can stabilize ahead of its recent low.
It should be noted that the major IXIC lows in late 2018 and early 2020 were accompanied by this type of dynamic convergence pattern.
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Terence Gabriel is a market analyst at Reuters. Opinions expressed are his own.
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