BNN Bloomberg's closing bell update: Dec. 6, 2022
U.S. stocks slumped amid downbeat economic warnings from bank chiefs at a time when concerns about the impacts of Federal Reserve policy on growth and corporate earnings are running rampant.
A selloff in tech giants like Apple Inc. and Tesla Inc. weighed heavily on the market, with the S&P 500 falling for a fourth straight day. Meta Platforms Inc. sank 6 per cent on a report the European Union is targeting the Facebook owner’s ad model. As traders sought safety, the dollar rose with Treasuries.
Goldman Sachs Group Inc.’s David Solomon warned about pay and job cuts, citing “some bumpy times ahead.” Bank of America Corp. is slowing hiring as fewer employees leave ahead of a possible economic contraction, chief Brian Moynihan said. Morgan Stanley will reduce its global workforce by about 2,000, while JPMorgan Chase & Co.’s Jamie Dimon told CNBC a “mild to hard recession” may hit next year.
“We have not yet seen the bottom on equity prices,” said Lauren Goodwin, portfolio strategist at New York Life Investments. “While this phase of equity market volatility is likely to end in the next few months, earnings have not yet adapted to a recessionary environment.”
Morgan Stanley Wealth Management’s Lisa Shalett said some of the biggest companies may see earnings hit far more than expected next year as economic growth slows and inflation erodes the purchasing power of consumers.
“A lot of corporate guidance is delusional,” Shalett told Bloomberg Television. “It’s going to be a rude awakening for a lot of folks.”
As shaky as markets look, one indicator looks solid: analysts’ view on the companies they cover.
After slashing their share-price targets over the summer at a pace seen only a handful of other times in history, they’re rolling back their skepticism and reducing the number of decreases relative to increases to a level last seen at the onset of the rout in January, data compiled by Bloomberg show.
To Katie Nixon at Northern Trust Wealth Management, the potential lack of earnings growth in 2023 may be a limiting factor to market performance amid the already elevated valuation level.
“Markets have never bottomed before a recession has begun,” said David Bailin, chief investment officer at Citi Global Wealth. “If there is in fact going to be a recession next year, if we are going to see a period of unemployment rising in the country, then we would expect that markets would have to settle down from where they are today over the course of the next several months.”
Key events this week:
- EIA crude oil inventory report, Wednesday
- Euro zone GDP, Wednesday
- U.S. MBA mortgage applications, Wednesday
- ECB President Christine Lagarde speaks, Thursday
- U.S. initial jobless claims, Thursday
- U.S. PPI, wholesale inventories, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
- The S&P 500 fell 1.6 per cent as of 1:53 p.m. New York time
- The Nasdaq 100 fell 1.9 per cent
- The Dow Jones Industrial Average fell 1.2 per cent
- The MSCI World index fell 1.4 per cent
- The Bloomberg Dollar Spot Index rose 0.3 per cent
- The euro fell 0.2 per cent to US$1.0468
- The British pound fell 0.3 per cent to US$1.2150
- The Japanese yen fell 0.2 per cent to 136.98 per dollar
- Bitcoin was little changed at US$16,972.68
- Ether fell 0.7 per cent to US$1,250.59
- The yield on 10-year Treasuries declined two basis points to 3.56 per cent
- Germany’s 10-year yield declined eight basis points to 1.80 per cent
- Britain’s 10-year yield declined three basis points to 3.08 per cent
- West Texas Intermediate crude fell 3.8 per cent to US$74.01 a barrel
- Gold futures were little changed