Immersion Buyers Save the Day When Stocks End Higher: Markets End

(Bloomberg) — Stocks closed higher at the start of a week likely to be marked by unsettling market turns, with the Federal Reserve expected to make its biggest rate hike in two decades.

Bloomberg’s Most Read

Dip buyers emerged after the worst month for the S&P 500 since the start of the pandemic, lifting the benchmark gauge after a drop that reached 1.7% on Monday. The tech-heavy Nasdaq 100 outperformed amid a rally in giants such as Microsoft Corp. and Tesla Inc. 10-year Treasury yields traded close to 3%, rising along with the dollar.

Negativity in the US stock market has become so overwhelming that a rally may not be far off, JPMorgan Chase & Co. strategists led by Marko Kolanovic said. They noted that the closely watched American Association of Individual Investors survey hit the lowest mark since early March 2009. That month marked the S&P 500’s bottom of the global financial crisis.

Fears of an economic slowdown, persistently high inflation and increasingly aggressive tightening rhetoric from Fed officials have weighed on risk appetite. While many strategists do not rule out a respite after the recent stock sell-off, there is also some skepticism that a rally will last given the current set of risks.

“As we shift the calendar to May, we may see a short-term oversold rebound, however we still have several reasons for concern,” wrote JC O’Hara, chief market technician at MKM Partners. “We believe that our long-term equity indicators are not yet sufficiently oversold to have a high conviction ‘buy’ call. We also believe that managers have started to price shares using recession-like multiples. If that is the case, we are still overvalued.”

More comments:

  • “On the upside, the market is currently so oversold that any good news could lead to a vicious bear market rally,” wrote Morgan Stanley’s chief US equity strategist Michael Wilson. “We can’t rule anything out in the short term, but we want to make it clear that this bear market is far from over in our view.”

  • “Sentiment measures have gone to extremes, while the market has historically traded higher after a four-week losing streak. However, given the current technical backdrop of lower lows and lower highs, a rally at this juncture should be considered a counter-trend rally and does not suggest a bottom has been reached,” wrote Craig W. Johnson, chief technical officer at Piper Sandler Market.

  • “Lately, a root canal appointment has sounded better than having to watch this stock market,” wrote strategists at Bespoke Investment Group. “Just when you think things can’t get any worse in this market, they do, as every bounce has been quickly disowned with stocks falling to new lows for the year.”

Read: US saw quarterly debt sales shrink once again, ahead of Fed’s QT

The move away from easy money is about to accelerate as central banks’ pandemic bond-buying backtracks, threatening another shock to the global economy. Analysts project the Fed will raise rates by 50 basis points on Wednesday to tackle the highest inflation in four decades and will start cutting its balance sheet at a maximum pace of $95bn per month, a faster turnaround than planned in early 2022.

Elsewhere, at least a dozen other central banks are due to make policy decisions in the coming week, with multiple rate hikes expected. They can range in size from the 15 basis points forecast by economists for Australia, to a quarter of a point in the UK, to full percentage points in Brazil and Poland.

Some corporate highlights:

  • Tesla needs more time to file a regular disclosure ahead of its annual shareholder meeting, delaying a possible breakdown of plans to issue new shares and a possible stock split.

  • Pfizer Inc.’s Paxlovid pill to treat Covid-19 showed no benefit as a preventative therapy in a trial.

  • The trading division of Goldman Sachs Group Inc. posted more than $100 million in revenue on 32 separate days, offering another glimpse into an extraordinary run through markets disrupted by war and unpredictable central bank actions.

Key events this week:

  • Reserve Bank of Australia rate decision Tuesday

  • US Factory Orders Durable Goods Tuesday

  • Fed Interest Rate Decision Briefing with Chairman Jerome Powell, Wednesday

  • EIA Crude Oil Inventory Report, Wednesday

  • Bank of England Rate Decision and Briefing Thursday

  • OPEC+ meets virtually for an ordinary meeting, on Thursday

  • April jobs report in the US, Friday

Some of the main movements in the markets:

Stocks

  • The S&P 500 was up 0.6% at 4 p.m. New York time.

  • The Nasdaq 100 rose 1.7%

  • The Dow Jones Industrial Average rose 0.3%

  • MSCI World Index little changed

coins

  • The Bloomberg Dollar Spot Index rose 0.4%

  • The euro fell 0.4% to $1.0504

  • Sterling fell 0.7% to $1.2489

  • The Japanese yen fell 0.4% to 130.18 per dollar

Captivity

raw Materials

  • West Texas Intermediate crude rose 0.8% to $105.48 a barrel.

  • Gold futures fell 2.6% to $1,862 an ounce.

Most Read Bloomberg Businessweek

©2022 Bloomberg LP

Leave a Reply

Your email address will not be published.