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Stocks heading for worst start since 1970

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The coming week will mark the end of the second quarter and the first half of a difficult year for investors in 2022.

Several key economic reports, including PCE core inflation – the Federal Reserve’s preferred measure of consumer prices – are under review, along with earnings from Nike (NKE), Jefferies (JEF), Micron Technology (MU) and Bed Bath & Beyond (BBBY). ). ).

The S&P 500 rose over 3% on Friday and gained over 6% on the week, marking the second best week of the year and the first weekly advance since the end of May.

The underlying index is still on par with the worst opening in six months since 1970. Only five times since 1932 has the S&P 500 lost 15% or more in the first six months of the year; By Friday’s close, the core index was down just under 18%.

“As bad as [this year] was for investors, the good news is that in previous years, when the fall was at least 15% in the middle of the year, the last six months each time grew, and the average return was almost 24%, ”- chief market strategist LPL Financial. Ryan Detrick noted earlier this week.

Indeed, investors generally remain optimistic that a recovery is ahead despite this year’s slowdown.

While analysts have lowered price targets for S&P 500 companies in recent months, bringing the index’s consensus upward price target below 5,000 for the first time since August 2021, the valuation of 4987.28 as of June 23 remains 31.4% above the close. same day closing price of 3795.73, according to FactSet data.

This suggests that analysts expect the index to rise by more than 30% over the next 12 months.

Rising price target for the S&P 500 compared to the closing price of the last 12 months.

JP Morgan strategist Marko Kolanovic indicated in a note to clients Friday that US stocks could rise 7% next week as investors rebalance portfolios at the end of the month, the second quarter and the first half of the year.

“Next week’s rebalancing is important as stock markets have been down significantly over the past month, quarter and six months,” Kolanovic said. “Additionally, the market is oversold, cash balances are at record levels, and recent activity in the short market is at a level not seen since 2008.”

On the economic calendar, traders will be keeping a close eye on Personal Consumption Expenditure (PCE) data this week. The Bureau of Economic Analysis is to release its monthly PCE deflator on Thursday, giving investors a final look at inflation in the US economy as the Federal Reserve raises its key benchmark interest rate to tame rising prices.

Economists polled by Bloomberg expect PCE to rise 0.7% in May, up from 0.2% the previous month. On an annualized basis, the PCE deflator is expected to accelerate by 6.4% from a 6.3% rise in April.

The main PCE index, which excludes the cost of food and energy, is expected to remain stable from the previous month. Economists expect core PCE to rise 5.1% in May, compared to a 5.1% rise in April.

US Federal Reserve Board Chairman Jerome Powell testifies ahead of House Financial Services Committee hearing in Washington, USA, June 23, 2022. REUTERS/Mary F. Calvert

US Federal Reserve Board Chairman Jerome Powell testifies ahead of House Financial Services Committee hearing in Washington, USA, June 23, 2022. REUTERS/Mary F. Calvert

The latest PCE data will be released as the US central bank’s fight against inflation looks increasingly difficult as a growing number of economists and strategists on Wall Street suggest the Fed can’t rein in prices without plunging the economy into recession.

“I’m really concerned that the likelihood of a soft landing, which means you bring inflation down without undue damage to growth and employment, has been greatly reduced by a series of Federal Reserve missteps,” economist Mohamed El-Erian told Yahoo Finance Live last week. .

Elsewhere on the economic calendar, investors will be keeping a close eye on durables on Monday, Conference Board consumer confidence on Tuesday, and several manufacturing and housing reports during the week. Investors will also receive the third and final Q1 GDP report.

In terms of earnings, Nike (NKE), Bed Bath & Beyond (BBBY), Jefferies (JEF) and Micron Technology (MU) will report.

Economic calendar

Monday: Durable Goods OrdersMay preliminary (expected 0.2%, 0.5% in the previous month); Durable goods other than transportpre-May (expected 0.3%, 0.4% in the previous month); Pending house saleson a monthly basis, May (expect -3.9%, -3.9% in the previous month); Expected NSA home salesyear on year, April (-11.5% in the previous month); Manufacturing activities of the Federal Reserve Bank of DallasJune (expected -6.5, -7.3 previous month)

Tuesday:Advance Trade Balance of GoodsMay (expected -$105.4 billion, -$105.9 billion the previous month, revised to -$106.7 billion); wholesale stockson a monthly basis, May provisional (expected 2.2%, 2.2% in the previous month); Retail Stockson a monthly basis, May (expected 1.6, 0.7% in the previous month); FHFA House Price IndexApril (expected 1.6%, 1.5% in the previous month); S&P CoreLogic Case-Shiller 20-City Compositeon a monthly basis, April (expected 1.85%, 2.42% in the previous month); S&P CoreLogic Case-Shiller 20-City Compositeyear on year, April (expected 21.20%, 21.17% in the previous month); S&P CoreLogic Case-Shiller US National House Price Indexyear on year, April (20.55% in the previous month); Consumer confidence in conference boardsJune (expected 100, 106.4 the previous month); Richmond Fed Manufacturing IndexJune (expected -5, -9 previous month)

Wednesday: MBA Mortgage Applicationsweek ending June 24 (-4.2% in the previous week); GDP year on yearQoQ, Q1, third (-1.5% expected, -1.5% previous); Personal consumptionQoQ, Q1, Q3 (3.1% expected, 3.1% earlier); GDP price indexQoQ, Q1, Q3 (8.1% expected, 8.1% earlier); PCE corequarter by quarter, 1 sq. sec. (5.1% expected, 5.1% earlier)

Thursday: Personal incomeon a monthly basis, May (expected 0.5%, 0.4% in the previous month); Personal expenseson a monthly basis, May (0.4% expected, 0.9% previous month); Real personal expenseson a monthly basis, May (expect -0.2%, 0.7% in the previous month); Initial Jobless Claimsweek ending June 25 (expected 230,000, 229,000 the previous week); Continuing claimsweek ending June 18 (expected 1.310 million, 1.315 million the previous week); Deflator PCEon a monthly basis, May (expected 0.7%, 0.2% in the previous month); Deflator PCEyear on year, May (expectation 6.4%, 6.3% in the previous month); PCE core deflatoron a monthly basis, May (expected 0.4%, 0.3% in the previous month); PCE core deflatoryear on year, May (expected 4.8%, 4.9% in the previous month); MNI Chicago PMIJune (expected 58, 60.3 previous month)

Friday: S&P Global PMI in the US manufacturing sectorJune final (52.4 expected, 52.4 earlier); Construction costson a monthly basis, May (expect 0.4%, 0.2% in the previous month); ISM ProductionJune (54.7 expected, 56.1 the previous month); ISM prices paidJune (80.0 expected, 82.2 previous month), ISM New Orders, June (55.1 previous month); ISM Employment, June (49.6 in the previous month); Total Wards Vehicle SalesJune (13.40 million, 12.68 the previous month)

income calendar

Monday

Before the market opens: There are no important reports scheduled for release.

After market close: Nike (NKE), Jeffreys Financial Group (JEF) Trip.com group (TKOM)

Tuesday

Before the market opens: There are no important reports scheduled for release.

After market close: AeroVironment (ABAB)

Wednesday

Before the market opens: Barnes and noble education (BNED), Bed Bath and more (BBBI), General Mills (GIS), McCormick & Co. (MCC), Paychex (PAYMENT)

After market close: Miller Knoll (MLKN)

Thursday

Before the market opens: Constellation of brands (STZ)

After market close: Micron Technologies (MU), Alliance Walgreens Boots (WBA)

Friday

There are no important reports scheduled for release.

Alexandra Semyonova, correspondent for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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