Good morning, this is jason ma starting a new week that will see a surge in quarterly earnings reports. Big names include Netflix, Tesla, Johnson & Johnson and Goldman Sachs. So far, results from big Wall Street banks have been mixed, with JPMorgan and Citigroup beating but Morgan Stanley falling short of forecasts.
Wednesday’s Tesla earnings report is also notable as CEO Elon Musk recently fueled speculation that the electric car maker could announce its first-ever stock buyback. If it does, it could coincide with a third quarter release.
The slate of economic news ahead is less dramatic, though Wednesday will include housing starts and the Beige Book, which will set the Federal Reserve for its next policy meeting in November. Wall Street is broadly bullish on a fourth consecutive rate hike of 75 basis points.
If it was given to you, register here. Download the Insider app here.
1. Wall Street debates whether Thursday’s massive reversal was real or fake. From intraday lows to highs, the Dow Jones Industrial Average fluctuated 1,500 points. For the S&P 500, Thursday marked the fifth largest intraday reversal from the low. And for the Nasdaq, it was the fourth largest.
Bank of America researchers said in a note Friday that the stunning rally in U.S. stocks represents a bullish “bear hug” that does not yet signal the start of a sustained rally. Michael Hartnett, the firm’s chief investment strategist, attributed the turnaround to buying power triggered by extreme oversold conditions.
Looking ahead, he still sees a “Big Low” in markets — but he’s waiting for signs of panic from the Fed first. He noted that the economy remains too strong, particularly in terms of employment and manufacturing, for the central bank to consider cutting rates, something it usually does when a major low occurs.
On the bullish side of the debate is Anthony Scaramucci, founder of investment management firm SkyBridge. He told CNBC on Friday that Thursday’s wild reversal was not just a bear market rally and could be the start of a new uptrend.
“In my opinion, we’re coming to the end of this bear market,” Scaramucci told CNBC on Friday. “It could have been a bear market rally, but I don’t think so. I think it’s the start of something new. I think there was a full capitulation to the short side yesterday and a lot of institutional buying.”
But the stock market is looming over the economy, which could slip into recession. Last Monday, JPMorgan CEO Jamie Dimon said he sees the stock market falling another “easy 20%” as a recession is likely to hit the US economy over the next six to nine months.
What do you think? Is the stock market poised for a sustained uptrend, or is it still teasing the rise of a bear market? By email [email protected].
In other news:
2. The pound rises as Britain’s new Chancellor of the Exchequer, Jeremy Hunt, accelerates the announcement of tax and spending plans. The British pound was trading above $1.12 early Monday. Additionally, US futures are rising – see levels here.
3. Earnings on board: Bank of America, Charles Schwab and others report.
4. The portfolio manager who beat 99% of his peers this year explains how most investors ignore opportunities. James Abate of Center Asset Management believes he stands out by unapologetically refusing to put his investment strategy in a box. He shared nine standout stocks that he says have enough price power to beat a bear market.
5. Wharton professor Jeremy Siegel said the housing market is skewed by high inflation. As housing data lags, he expects house prices to fall by as much as 15%. But the bigger concern for Siegel is what the Fed will do in response to falling home prices: nothing.
6. China is facing a full-blown debt crisis with $8 trillion at risk as Xi pursues an unprecedented third term in office. Bonds issued by local government financial instruments are on the brink of default amid a wider housing market meltdown. Experts believe Beijing will have to step in with a bailout as officials try to prevent further deterioration of an already slowing economy.
7. According to Bank of America, the silver lining in this year’s 25% decline in the stock market is that there is less risk of a “lost decade” going forward. The bank’s long-term valuation model points to annual gains of 6% over the next decade. But the stock market isn’t out of the woods just yet, as more pain could be coming in the near term.
8. Doug Ramsey, chief investment officer of The Leuthold Group, sees big risks ahead for stocks. Valuations in past declines suggest the S&P 500 could fall another 28%. Here’s how Ramsey is investing now to protect his portfolio from further pain.
9. UBS Global Wealth Management explains what investors should do when rates rise and the economy slows. At least for a little while, nothing will deter the Fed from raising rates, said Chief Investment Officer Mark Haefele. Here’s what he thinks investors should do now.
10. Lumber prices rose this month despite a slowing housing market and rising mortgage rates. The key construction commodity could be back in the spotlight as fresh homebuilding data is released on Wednesday. Despite the recent uptrend, lumber is well off its May 2021 all-time highs.
Keep up with the latest market news throughout the day by listening to The Refresh from Insider, a dynamic audio report from Insider’s editors. Listen here.
Curated by Jason Ma in Los Angeles. Feedback or tips? Email [email protected]