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The
S&P 500
dipped a toe into bear market territory on Friday before pulling back to close higher than the level that marks a 20% drop from the peak. Futures indicated further gains Monday morning.
Nevertheless, the index has now declined for seven consecutive weeks. The
Dow Jones Industrial Average
fell for an eighth week. The technology-heavy Nasdaq is already well into a bear market.
The reasons for the slight turnaround seem very short-term. Talk about reducing tariffs on China bolstered sentiment, but nothing has actually happened yet.
On the other hand, none of the reasons to be gloomy have changed much. Retailers reporting this week will show us more about how households are coping with inflation, and the evidence so far isn’t pretty. The Federal Reserve minutes this week will probably show policy makers are still determined to keep hiking rates to kill off inflation, possibly taking the economy down with it.
For anyone hoping that some lofty words at the World Economic Forum in Davos, which started last night, will save the world—good luck with that.
Bank of America
strategists say that, if history is any guide, the S&P could bottom out at 3,000 in October. That compares with Friday’s close of 3,901. The bullish case is for the bottom to be 3,600.
They say that “hope springs eternal” and that we “live in hope.” But anyone who’s ever seen their favorite team lose in a heartbreaker knows it can also be the hope that kills you.
—Brian Swint
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This week’s earnings from retailers including
Macy’s
,
Dollar Tree
,
and
Costco Wholesale
will shed light on how consumers are navigating inflation, higher gasoline costs, and their household budgets.
Walmart
’s
and
Target
’s
recent underwhelming earnings show shoppers are spending more carefully.
S&P Retail Select Index
is down 32% year-to-date, compared with the S&P 500’s 18% decline.
Visa
’s
spending momentum index is at its lowest point since February 2021 as consumers spend more for food and gas, and less on discretionary items.
What’s Next: On Friday, the Bureau of Economic Analysis is scheduled to release the personal income, personal spending data, and the personal consumption expenditure price index for April. Both income and expenditures are expected to rise about 0.6% from the prior month.
—Janet H. Cho
The Defense Department has contracted with
FedEx
to transport a second formula flight, of
Nestlé
’s
Gerber Good Start Extensive hypoallergenic formula from Germany to Washington Dulles International Airport in coming days. The specialty formula is for children who are allergic to the protein in cow’s milk.
Abbott Laboratories
CEO Robert Ford wrote a letter to the Washington Post apologizing for the company’s part in the shortage. It closed a Michigan factory earlier this year after a voluntary recall. That factory could reopen by the first week of June.
What’s Next: National Economic Council Director Brian Deese asked on CNN why three companies control 90% of the nation’s baby formula production, saying the U.S. needs more competition and more formula manufacturers, “so that no individual company has this much control over supply chains.”
—Janet H. Cho
Shares of cloud computing provider
VMware
were surging Monday, after reports said chip maker
Broadcom
was in talks to buy the software company. Broadcom, with a market value of about $222 billion, is negotiating to buy VMware, with a value of about $40 billion as of Friday’s market close, according to a report by The Wall Street Journal.
What’s Next: The transaction shows that deal making isn’t dead even though the drop in the S&P 500 this year to the brink of a bear market has made things more difficult. VMware is due to report earnings on Wednesday and Broadcom’s earnings are scheduled for next week, so expect imminent updates.
—Brian Swint
JPMorgan Chase
holds its first investor day in two years today, facing criticism over its plans to spend billions of dollars this year on technology upgrades and other projects and award CEO Jamie Dimon a $50 million one-time bonus, which shareholders rebuked in a symbolic vote.
Invesco KBW Bank ETF,
which counts JPM as one of its biggest holdings, and the 18% drop in the S&P 500.
What’s Next: Now that the Federal Reserve is expected to raise interest rates at a faster pace this year, analysts are watching for JPMorgan to raise its guidance for 2022 net interest income because it can earn more from lending than previously expected, the FT reported.
—Liz Moyer
Ukrainian President Volodymyr Zelensky addresses the World Economic Forum in Davos, Switzerland, today as the annual meeting convenes in person for the first time since 2020. Headliners include German Chancellor Olaf Scholz, European Central Bank President Christine Lagarde, and European Commission President Ursula von der Leyen.
Moderna
CEO Stéphane Bancel,
Citigroup
CEO Jane Fraser, and International Monetary Fund head Kristalina Georgieva. Russian President Vladimir Putin and Russian business oligarchs weren’t invited.
What’s Next: The global growth outlook remains shaky. Many of the CEOs at Davos likely lead companies that have seen steep stock declines and continue to face supply and pricing challenges. That is likely to be a topic of conversation both on the stage and behind the scenes this week.
—Jack Denton and Janet H. Cho
Real estate is still appreciating while the stock market tumbles. Can a real estate investor still do a tax-free ‘Section 1031 exchange’ for a greatly appreciated real property investment?
A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to thebarronsdaily@barrons.com.
—Newsletter edited by Liz Moyer, Camilla Imperiali, Rupert Steiner
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