DayTradeToWin Financial Market News – Page 167 of 203

Empire of the Bulls: Understanding Bearish Persistence Amid the U.S. Stock-Market Rally

John Paul / July 18, 2023

The robust growth seen in the U.S. stock market during the first half of 2023 continued into the second half, encouraging optimistic investors to remain hopeful. This optimism has pushed the tech-heavy Nasdaq 100 index to increase by 42% for the year to date. On the other hand, conservative investors are trying to foresee when this positive trend will slow down and begin a downward trajectory. The gap between optimistic stock-market investors, known as bulls, who buy stocks anticipating a rise in value, and pessimists, known as bears, who anticipate a market downturn and attempt to profit from declining stock prices, has notably widened. Liz Young, SoFi’s chief of investment strategy, compared the current financial conditions to a contentious political environment, with both factions expressing hostility and failing to agree. She stated this was to be expected, given the overwhelming amount of conflicting data, such as the unexpected stock market boom despite negative economic and bond market signs. This week’s encouraging inflation statistics have increased the chances of the Federal Reserve stopping its interest-rate increases. There are growing indications of a soft landing, where inflation returns to approximately 2%, in line with the central bank’s target, without triggering a downturn. On Thursday, for the first time since April 2022, the S&P 500 surpassed 4,500 points, achieving a new peak of 15 months. According to FactSet data, it climbed 2.4% this week, while the Nasdaq Composite increased by 3.2%, and the Dow Jones Industrial Average rose by 2.3%. MarketWatch obtained insights from market experts who believe that the current disagreement between bullish and pessimistic investors is set to persist. They propose that total optimism will not be realized until there’s clarity over pressing issues related to monetary policy, economic indicators, and the volatility in the Treasury yield curve. “We persistently face a phase of financial reduction, the conclusion of which is unclear. There’s widespread prediction of a contraction based on multiple economic indicators. There are a variety of signs, such as inverted yield curves, indicating that our financial condition is still unstable,” Young commented in a Friday interview. “Discussions on this subject are continuing, and I am inclined to favor a cautious strategy, particularly in light of the current market assessments.” The head of applied research at Qontigo, Melissa Brown, indicates that market trends are expected to proceed at a steady yet cautious pace, moving in a two steps forward, one step back manner. However, an event sparking adverse investor emotions could upset this rhythm, much like various incidents that happened in the past year. A notable rise in the value of prominent technology stocks such as Nvidia Corp., Meta Platforms, and Alphabet Inc. has largely contributed to the S&P 500’s surge over 17% this year. This is majorly due to growing excitement around artificial intelligence (AI). However, Young warns that investors might be overestimating these stocks’ worth due to their infatuation with AI. If these stocks fail to produce the expected results within a year, their current value may not remain attractive. “When buying shares, your choices are typically grounded on the anticipated profits for the forthcoming year. Although AI could indeed instigate impactful alterations in a variety of sectors, it’s not expected to radically transform the tech ecosystem within this year,” she clarified. The predicted time frame might be the factor that doesn’t go as planned. Brown from Qontigo pointed out the ongoing volatility in the stock market, which has experienced significant declines since March’s end. This timeframe coincided with decreasing concerns about the banking industry, after the sudden downfall of Silicon Valley Bank. On Friday, The CBOE Volatility Index VIX was noted at 13.31, shortly after hitting the lowest level in more than three years. Typically, a sub-20 VIX value suggests a low-risk environment perception, whereas a value above 20 signifies a period of heightened market volatility. Brown explained that her models demonstrate an increasing inconsistency between a basic model, which assesses market instability in relation to economic situations, and a statistical model, which establishes volatility grounded on the given data. The forecasted statistical model exhibits a considerably higher risk than the fundamental model, potentially making it the first occurrence in more than half a decade. This suggests there might be hidden fluctuation indicating that it’s developing under the radar, Brown explained to MarketWatch during a phone call on Friday. Raheel Siddiqui, Senior Research Analyst of Global Equity Research at Neuberger Berman, has expressed concern over the upcoming liquidity crisis. He notes that investors have significantly more investments compared to their liquid assets, especially with their investments in large capitalization growth stocks. Siddiqui highlighted in his third-quarter equity market forecast that investor interest is likely to decrease with the reduction of liquidity, something he expects to happen shortly due to potential large-scale withdrawals in the near future. His comments referred to several forthcoming events – the expected scale back by the Federal Reserve of its monthly balance sheet, notably called quantitative tightening, the Treasury’s intention to produce new debt to replenish the Treasury General Account, following Congress’s move to increase the debt-ceiling, and the European Central Bank’s plan to retract €477 billion in TLTRO funding from the banking framework. Siddiqui’s viewpoint indicates a possible negative effect on shares in the forthcoming time period. Despite a decrease in optimism, the stock market has remained above average for the sixth consecutive week, as per the latest Sentiment Survey by the American Association of Individual Investors (AAII). There was an increase in both neutral and negative sentiments during the week leading up to Wednesday. SoFi’s Young observed a significant change in investors’ attitude, moving from consistently pessimistic to optimistic. Even though the graph doesn’t show a stark contrast in the number of optimists versus pessimists, she highlighted that the sudden shift in stance is quite remarkable. “Young pointed out that swift and notable changes can usually result in a similarly quick and considerable shift as markets and investors attempt to establish equilibrium,”

Market News

Wise Moves in Uncertain Times: 3 Don’ts for Handling a Stock Market Collapse

John Paul / July 17, 2023

Imagine a normal day at the office when suddenly, an alert appears on your smartphone indicating a significant plunge in the stock market. What do you do? Like several others, you might react impulsively and in a way that may not be the best or most advised course of action. You should not take three key steps during a nosedive in the stock market. Familiarizing yourself with these can help you avert potentially costly blunders in the future. 1. Don’t panic Firstly, resist yielding to the anxiety that many headlines seem to incite in you. Remember that the goal of those who create headlines is to draw the most readers to their articles, leading to more exaggerated headlines such as “Dow Plummets 600 points!” rather than more moderate ones like “Stock Market Declines 1.7% Today.” It’s crucial to understand that each of these headlines reflects the same rate of decrease; given the Dow’s recent proximity to 34,000, a fall of 600 points equates to a 1.7% decline. Stay focused on the percentages, not the points. Concentrating on your enduring performance instead of a fleeting perspective can keep you from reacting impulsively. There may be moments when you suffer a temporary decline in the stock, but the company’s future value is paramount for long-term investors. Typically, a decrease in the stock market doesn’t equate to a diminished growth potential of a company; hence, it’s usually better to hold on. Offloading a stock when it’s low is an assured way to incur a loss or negligible profits. Rather than obsessing over the rise and fall of stock prices, focus on their overall worth. Say, for example, you bought shares at $60 per share, and now they’ve fallen to $50, don’t get hung up on the near 17% drop. Instead, evaluate the true value of the company and its stock. If the business is successful, maintains manageable debt levels, has ample cash reserves, and grows by launching new products, employing more individuals, and constructing more factories or shops, it indicates potential. As a result, its stock price may very well rise in the future. 2. Don’t exit the stock market Staying calm can help you avoid significant errors, such as selling your stocks out of stress due to a falling stock market. It’s important to remember that the stock market goes through periodic dips, sometimes severe or long-lasting. However, no matter how big or small past corrections and crashes have been, the market has always managed to recover and reach new peaks. For instance, the Schwab Center for Financial Research’s data shows the stock market experiences a “correction,” or a decrease of 10% to 20%, roughly every alternate year. This pattern was noticeable over two decades, from 2001 through 2021. Even though the stock market faces these temporary drops, it generally bounces back quickly. It was observed that the stock market has grown in the majority of these years — with just three outliers — achieving an average gain of about 7%. Furthermore, another reputed market analysis firm, Yardeni Research, has analyzed data from 1950 onwards, concluding that such market disruptions occur every 1.9 years. Among these, 32 corrections lasted less than a year, while 24 were less than four months. It’s prudent to refrain from impulsive selling when the stock market is experiencing a slump, but it is even more astute to use such situations to buy stocks if possible. This is because a significant dip in the stock market can allow you to purchase shares in prosperous, thriving companies at a reduced price. To be ready for this opportunity, keeping a list of stocks you’re interested in buying at the right price is a good strategy. Plus, keeping some money on hand for these occasions is worthwhile. However, it’s crucial not to keep too much of your portfolio in liquid cash as it may result in you losing potential profits while waiting for the perfect moment. 3. Never lose sight of your goal In summary, never lose sight of your main objective – your investments’ substantial and continuous growth. This necessitates a consistent and structured investment of your money in simple but effective index funds and/or individual stocks. Putting your money in affordable, highly efficient index funds may be all you need to realize long-term development. Undoubtedly, this procedure will necessitate a substantial duration, optimally spanning twenty years or more. The stock market will unavoidably experience dramatic peaks and troughs during this lengthy period. Despite this, there’s a considerable chance of reaping substantial gains. It’s vital, however, to remain calm during each market downturn and stick to your plan. Investing additional money in your portfolio can be particularly beneficial when the market is low, so don’t stop investing. Try not to monitor your portfolio on a daily or hourly basis obsessively. Trust in the process, and if you’re feeling unsure, learn more about investment strategies to strengthen your faith in your approach. Financial downturns, such as stock market crashes and recessions, could improve your long-term financial health if you think logically. We prefer ten other stocks over Walmart. Observing our team of analysts’ investment recommendations could be advantageous. For over a decade, they’ve handled the Motley Fool Stock Advisor newsletter, which has tripled market performance. They have recently revealed their top ten stock picks for immediate investment. Shockingly, Walmart doesn’t cut. That’s right–they believe these ten stocks provide better investment opportunities.

Market News

Breaking Down the Forecast: Why Experts Believe the Stock Market Will Remain ‘Fat and Flat’ in the Current Year

John Paul / July 16, 2023

The stock market is still on the rise. The Nasdaq Composite (^IXIC) has seen its best first six months in four decades, while the S&P 500 (^GSPC) has grown by 16% during this same period. What is the forecasted trend for stocks in the later part of 2023? Analysts at Goldman Sachs predict a steady and stable performance of stocks. As the Federal Reserve increases interest rates to fight inflation, investors are questioning if the central bank will be able to achieve a soft landing in the US. This refers to slowing down the economy without causing a recession. Strong economic indicators have prompted Wall Street economists to reassess their forecasts of an economic slump this year. Goldman Sachs analysts have reported that despite their economists forecasting a smooth slowdown of the US economy and a return to normal inflation rates, enduring uncertainties remain. Therefore, we predict that shares will remain in their ‘overinflated and inactive’ zone,” penned Christian Mueller-Glissmann and his group at Goldman Sachs in a message to investors on Friday. In June, experts from Goldman Sachs downgraded their prediction for a US recession in the upcoming year from 35% to 25%. However, Mueller-Glissman and his team warn that inflation could persist, potentially leading to an unexpected shift to a protective approach by central banks. The Consumer Price Index in June showed a rise of 3% from the previous year, indicating the least yearly growth since March 2021, as revealed by the inflation data. Economists are discussing whether the central bank will increase rates twice this year due to decreasing inflation and fluctuating economic indicators. Regardless of the economic deceleration, the inflation percentage for June is 3%, surpassing the Federal Reserve’s target of 2%. Goldman analysts also underscore the uneven global growth figures from China and Europe. The data received from China for the second quarter has been noticeably disappointing, and the international manufacturing sector’s ongoing difficulties are starting to affect services in the Eurozone, as stated in the memo. It also mentioned that a potential risk in the latter half of the year could be that global Buying Managers’ Indexes (PMIs) may begin to hurt earnings adjustments, especially as inflation begins to level off simultaneously. Goldman notes a substantial rise in the readiness to invest in shares throughout June. Prominent technology companies like Nvidia (NVDA) have played a significant role in the strong performance of the markets up to this point. Nvidia notably hit a new record high on Friday. The value of Apple’s (AAPL) shares has seen a growth of around 50% this year, while Tesla’s (TSLA) shares have surged by an impressive 127% in the same period. Initially, specialists warned of a narrow range for this year’s surge, but investors have been investigating other alternatives and have achieved their top value in 52 weeks. Even the stocks regularly subjected to short selling also contribute to the surge.

Market News

Bear vs. Bull: Probing the Persistence of Bearish Sentiments Amidst U.S. Stock-Market Surge

John Paul / July 15, 2023

The momentum remains upbeat in the U.S. stock market as we enter the second half of 2023. This has generated optimism among investors, particularly with the technology-focused Nasdaq 100 index experiencing a 42% increase this year. On the other hand, cautious investors closely observe the situation, awaiting the inevitable decline and fading of the current market momentum. There has been a significant increase in the divide between those who believe that the stock market has the potential to grow (referred to as the bulls) and those who predict a decline (known as the bears). Liz Young, who leads investment strategy at SoFi, likened the current situation to a political landscape brimming with animosity and resentment between opposing sides, rendering consensus difficult to achieve. This is primarily due to conflicting data, including a stock-market rally that appears disconnected from economic indicators and bond market signals indicating potential problems. Despite these concerns, U.S. stocks continued to climb this week, buoyed by positive inflation readings that raise the likelihood of the Federal Reserve ending its interest rate hikes. There is growing optimism for a gentle economic slowdown, where inflation returns to the central bank’s desired level without a recession. As evidence of this positive sentiment, the S&P 500 hit a new high since April 2022, registering a 2.4% increase for the week, while the Nasdaq Composite rose by 3.2% and the Dow Jones Industrial Average saw a gain of 2.3%. According to market analysts, the ongoing conflict between the optimistic market participants (bulls) and the pessimistic ones (bears) will persist. They stated that a complete adoption of positive sentiment would not occur until uncertainties regarding monetary policy, economic indicators, and the inversion of Treasury yield curves have been acknowledged and resolved. Young stated in a later interview on Friday that we might still be implementing stricter measures regarding the country’s monetary policy. Several indicators, such as the yield-curve inversions, indicate that the economy is shrinking, and we have not yet overcome the challenging situation. The conversation about this matter will continue, and Young personally adopts a more careful approach, especially when considering the current valuations. According to Melissa Brown, who holds the position of applied research managing director at Qontigo, the current anticipation is that markets will move forward. However, there may be occasional obstacles, unless something occurs to cause investors to become negative, similar to the situation experienced for most of the previous year. The S&P 500 has experienced a 17% increase this year, primarily due to the rising value of prominent tech stocks like Nvidia Corp., Meta Platforms, and Alphabet Inc. This surge in value can be attributed to the growing optimism surrounding artificial intelligence (AI). Nevertheless, there is a potential concern that investors may be overpaying for stocks based on the excitement surrounding AI. If positive outcomes are not observed within the upcoming year, Young suggests that the appeal of these stocks may diminish. The speaker noted that stocks are typically bought to earn profits over the next year. Although AI may greatly influence different industries, it is unlikely to completely transform the technology world by the end of this year. Hence, the potential problem arises from having unrealistic expectations regarding the timeframe. Brown from Qontigo also brought up the current lack of stability in the stock market, which has decreased significantly since late March when concerns about the banking sector eased after the unexpected collapse of Silicon Valley Bank. As of Friday, the CBOE Volatility Index VIX stood at 13.31, recently hitting its lowest level over three years. Typically, a VIX score below 20 indicates a perceived low-risk scenario, while a score above 20 indicates an increased period of volatility. However, Brown explained that her models suggest an increasing difference between a simple model that analyzes market volatility using economic factors and a statistical model that uses data to identify where the volatility occurs. In a conversation with MarketWatch, Brown stated that for the past six years, possibly even longer, this is the first time the statistical model has predicted a significantly higher level of risk compared to the fundamental model. This suggests that there is hidden or emerging volatility, which can potentially be a threat. Raheel Siddiqui, a senior researcher at Neuberger Berman, highlighted his worries regarding the forthcoming scarcity of available funds. He pointed out that investors, especially those involved in high-growth mega-cap stocks, are currently excessively invested compared to the amount of liquid assets accessible. In his Q3 outlook on the stock market, Siddiqui noted that investor enthusiasm tends to diminish when there is reduced availability of funds, which is likely to happen shortly for various reasons. These reasons consist of the Federal Reserve’s desire to decrease its balance sheet through quantitative tightening gradually, the Treasury’s issuance of fresh debt to replenish the Treasury General Account after Congress raised the debt ceiling, and the European Central Bank’s strategy to withdraw €477 billion in TLTRO financing from the banking system. Siddiqui stated that he believes stocks could experience negative outcomes soon. According to the latest American Association of Individual Investors (AAII) Sentiment Survey, stock-market optimism declined but is still above average for the sixth straight week. Additionally, neutral and bearish sentiments rose throughout the week until Wednesday. However, Young from SoFi has mentioned that there has been a significant change in investors’ attitudes from negative to positive. She emphasized that although the chart does not show a large difference between optimists and pessimists, the sudden and dramatic shift in their opinions is noteworthy. Young suggests that when there are notable and quick shifts, there will often be equally substantial and swift shifts in the opposite direction. This occurs as markets and investors attempt to achieve equilibrium.

Market News

Inflation Recedes, Wall Street Revels in Continued Success Throughout the Week

John Paul / July 14, 2023

Wall Street’s winning streak persisted for the fourth day on Thursday, following signs that inflation is progressively becoming less of a burden on the economy. The S&P 500 increased by 0.8%, gaining 37.88 points and reaching 4,510.04 – its highest closing value since April 2022. The Dow Jones Industrial Average had a smaller increase of 0.1%, closing at 34,395.14 after gaining 47.71 points. The Nasdaq composite had a notable surge of 1.6%, rising by 219.61 points and reaching 14,138.57, driven by the strong performance of Big Tech stocks. The S&P 500 is on track to experience its seventh week of increases in the past nine weeks. This is because recent data indicate that the rate of inflation is declining. As a result, there is optimism that the Federal Reserve will soon cease its efforts to raise interest rates. In June, there was lower-than-expected inflation in the wholesale sector, with producers paying only a 0.1% increase compared to the previous year. This is a significant drop from the 11.2% inflation recorded last summer. Investors are worried about a possible economic downturn because of the notable inflation levels. To control prices, the Federal Reserve has raised interest rates, which has caused this concern. The increased rates hinder inflation by slowing the entire economy and affecting investment prices unfavorably. Furthermore, they can cause unexpected disruptions in specific sectors of the economy. Traders strongly believe that the Federal Reserve will raise the federal funds rate in the next two weeks, the highest since 2001. Nevertheless, analysis of recent inflation data has caused traders to ponder if this might be the final increase in the current cycle. A recently published report on Wednesday highlighted that consumer prices in June witnessed a 3% increase compared to the previous year. This demonstrates a substantial decline from last summer when the inflation rate was over 9%. Deutsche Bank economists aptly describe this as a “refreshing summer breeze.” The decrease in traders’ predictions for future interest rate hikes by the Federal Reserve caused Treasury yields to keep dropping in the bond market. The interest rate for mortgages and other important loans is affected by the 10-year Treasury yield, which dropped from 3.86% on Wednesday to 3.98% on Tuesday and is currently at 3.76%. The interest rate on the two-year Treasury notes declined from 4.75% on Wednesday and 4.89% on Tuesday to 4.63%. This rate often changes in response to forecasts about the Federal Reserve’s future actions. The rate of decline in yields accelerated when James Bullard revealed in the afternoon his intention to step down as the president of the St. Louis Federal Reserve Bank and take on the position of dean at Purdue University’s business school in the upcoming month. Bullard was recognized for advocating for higher interest rates to control inflation. Lower interest rates positively impact different types of investments. However, many investors believe that technology and other stocks with high growth potential will yield substantial profits. The S&P 500 experienced a boost due to the significant contribution of Amazon, Alphabet, and Nvidia. Amazon witnessed a growth of 2.7% as it announced that its annual Prime Day event had surpassed previous records and became its most profitable sales day ever. After Google announced that they would be extending the availability of Bard, their artificial intelligence-powered chatbot, to various countries around the world and introducing more features, the stock of Alphabet witnessed a 4.7% increase. Nvidia, a prominent presence in the field of AI and a company that has been generating buzz on Wall Street, saw a rise of 4.7%. After exceeding analysts’ projections for profits in the spring, PepsiCo experienced a 2.4% increase in its stock value. Despite declining demand for beverages and snacks, the company achieved higher earnings by implementing price hikes. Furthermore, PepsiCo has revised its annual forecasts, expecting better results for the year. Earnings reporting season has just started, and JPMorgan Chase will be the first bank to announce their profits for the spring period on Friday. Unfortunately, the overall forecast is not positive, with experts predicting a notable decrease in earnings for S&P 500 companies. This decline is expected to be the largest since the global economy was heavily affected by the pandemic last year. Even though there is a risk of a recession, the job market has shown its ability to withstand it and has supported the economy. Recent statistics revealed fewer individuals filed for unemployment benefits last week than expected. However, it is important to acknowledge that an extremely strong job market might result in the Federal Reserve implementing more aggressive actions regarding interest rates and controlling inflation. Chun Wang, a senior research analyst, and co-portfolio manager at Leuthold, has raised a concern that while inflation is showing some positive indications, there is a danger that Wall Street is quickly assuming it will decrease significantly, leading the Federal Reserve to lower interest rates and prevent a recession. Wang’s report highlights a worry that the market is not giving enough consideration to the likelihood of inflation staying between 3% and 4% over the next six to 12 months. Wang suggests that the predictability of both inflation and the Federal Reserve’s policy is uncertain, as there is a suspicion that the widely held belief of a seamless economic transition will face significant challenges soon. On Thursday, there was a decrease in Exxon Mobil’s stock market performance. The company’s stocks dropped by 1.8% after they announced their acquisition of Denbury, a company with pipelines for carbon dioxide. This acquisition, which is worth $4.9 billion in stock, caused Denbury’s stocks to also decrease by 1.3%.

Market News

Increase in S&P 500 Futures Prominent in Premarket Trading

John Paul / July 13, 2023

Coherent Corp. (COHR) saw a 5.0% rise in pre-market trading a mere two hours before the opening of U.S. stock markets. Similarly, Delta Air Lines Inc. (DAL) experienced a 4.5% increase during this period. Trade Desk Inc. Cl A (TTD), American Airlines Group Inc. (AAL), and CAVA Group Inc. (CAVA) all saw their share prices rise by at least 3%. However, Carvana Co. Cl A (CVNA) and SoFi Technologies Inc. (SOFI) suffered losses of 5.5% and 3.7%, respectively, at the beginning of the trading day. Simultaneously, S&P 500 futures witnessed an uptick of 0.29%, while Dow Jones Industrial Average futures rose by 0.15%. Conversely, the Cboe Volatility Index futures saw a decline of 7.38%. In commodities, Brent crude oil futures experienced a rise of 0.22%, and gold futures increased by 0.14%. Bitcoin also climbed by 0.78% to reach $30,580. The 10-Year Treasury yield decreased to 3.835%. During the previous regular trading session, the S&P 500 and the Dow increased by 0.74% and 0.25%, respectively. Overnight, Asian stocks also saw gains, with Japan’s NIKKEI 225 Index rising by 1.49% and China’s Shanghai Composite Index increasing by 1.26%. In afternoon trading, European stocks also experienced gains, with the STOXX Europe 600 Index up by 0.68% and the FTSE 100 Index up by 0.42% compared to the previous close. U.S. stock markets open for trading at 9:30 a.m. ET. For regular updates on the trading day, you can visit Barron’s.