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Rampaging Stock Bears Slowed at Key S&P 500 Technical Level

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September 23, 2022
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(Bloomberg) — The spillover from the UK’s proposed tax cuts is washing into the US stock market.

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A Great Copper Squeeze Is Coming for the Global Economy

The S&P 500 is set to open down more than 1%, bringing its rout in the week past 4%. The index already closed below the closely watched level of 3,800, leaving the June bear-market low of 3,666 as the next line of support on technical charts.

The UK government unveiled a sweeping tax-cut plan that crashed the pound and the nation’s bonds as investors fretted over the stimulative effects with inflation running rampant. That soured an already tart mood for risk assets around the world. Futures on the S&P 500 plunged 1.4% as of 8:42 a.m. in New York, and traders who watch charts for signs of where the drop might ease are bracing for the worst.

“The technicals have fallen out of bed,” Art Hogan, chief market strategist at B. Riley, said in a phone call. “Losing 3,800 now brings the June lows into line of sight, so that has people waiting for that to happen.”

The S&P 500 is set to fall for a fourth straight day and is on track for its fourth weekly decline in five. The selloff has been unforgiving across sectors: the gauge has had over 400 members close lower on each of the last three days before Friday.

Its breakdown since the August peaks solidifies the downtrend channel in place since the bull market apex in early January, according to Gina Martin Adams at Bloomberg Intelligence. “The breakdown beneath 3,900 support leaves little for the index to grasp at on its way to testing the June lows,” she wrote in a note.

The Federal Reserve this week made it crystal clear that it’s going to keep raising rates sharply until officials see signs that price pressures are easing. That process won’t be “painless” for the labor and housing markets, Fed Chair Jerome Powell warned.

Its rate hike on Wednesday came with projections that the central bank has another 1.25 percentage points of tightening in store for investors this year, a far more aggressive pace than investors expected.

Despite the rout, stocks are still far from being obvious bargains. At the low in June, the S&P 500 was trading at 18 times earnings, a multiple that surpassed trough valuations seen in all previous 11 bear cycles, data compiled by Bloomberg show. In other words, should equities recover from here, this bear-market bottom will have been the most expensive since the 1950s.

While investors used to be positioned as if the economy was headed for a soft landing, that’s no longer the case, according to Anastasia Amoroso, chief investment strategist at iCapital.

“What the markets really need to do is price in a recession because it seems like that’s what a weakness in the labor market would ultimately cost,” she said on Bloomberg TV this week.

The market’s been trading in a 3,700-3,800 to 4,300 range for a while now, she said.

“We may need to see a break below the bottom of that trading range to really find dirt-cheap value in equities,” Amoroso said. “We’re just not there yet, so the trade for now is to actually be defensive and to get paid while you wait for this bottom in the market.”

As for the June low, many are seeing an ominous signal in the number. The S&P 500 would have to fall another 2% to reach it.

“Anything that’s lower than where it is now feels devilish,” Kim Forrest, founder and chief investment officer at Bokeh Capital Partners, said in an interview.

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©2022 Bloomberg L.P.

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MarketWatch

Growling Powell causes Goldman to cut its S&P 500 price target. Again.

“Money Printer Go Brrr” featured a Rambo-esque Jay Powell, chair of the Federal Reserve, determinedly firing out greenbacks to whoever could scoop them up. Well, now “Jay Powell Go Grrr” would be more apt. Now Goldman Sachs is citing Powell’s projected rate hikes as a reason to lower its S&P 500 (SPX) year-end target from 4,300 to 3,600.

Bloomberg

Stock Selloff Turns Ugly as UK Plan Rattles Globe: Markets Wrap

(Bloomberg) — A selloff in the riskier corners of the market deepened as the UK’s plan to lift the economy fueled concerns about heightened inflation that could lead to tighter monetary policy, boosting the odds of a recession.Most Read from BloombergJapan to Restore Visa-Free Travel From Oct. 11 as Covid Pandemic Recedes South Korea President Caught on Hot Mic Insulting US CongressBank of England Says Paper Banknotes Only Good for One More WeekUnless Rents Rise, Housing Is Set Up for an Epic C

Bloomberg

Goldman Slashes S&P 500 Target Citing Higher Fed Rates Path

(Bloomberg) — Goldman Sachs Group Inc. slashed its year-end target for the S&P 500 Index to 3,600 from 4,300, arguing that a dramatic shift in the outlook for interest rates moving higher will weigh on valuations for US equities.Most Read from BloombergJapan to Restore Visa-Free Travel From Oct. 11 as Covid Pandemic Recedes South Korea President Caught on Hot Mic Insulting US CongressBank of England Says Paper Banknotes Only Good for One More WeekUnless Rents Rise, Housing Is Set Up for an Epic

The Wall Street Journal

Oil Falls Below $80 a Barrel

Oil prices fell to the lowest levels since January as fears about a global recession accelerated and the dollar strengthened further. + U.S. benchmark _WTI_ traded at $79.23 a barrel, sliding 5%. WTI hadn’t been below $80 intraday since Jan. 11. + Global crude benchmark [_**Brent**_](https://www.wsj.com/market-data/quotes/futures/UK/IFEU/BRN0) declined 4.3% to trade at $85.70 a barrel. “The market is worried about growth and this is sending commodity prices down,” said Ole Hansen, head of commod

Reuters

Bond sell-off worst since 1949, investor sentiment plummets – BofA

LONDON (Reuters) -Global government bond losses are on course for the worst year since 1949 and investor sentiment has plummeted to its lowest since the financial crisis, BofA Global Research said in a note on Friday. Bond funds recorded outflows of $6.9 billion during the week to Wednesday, while $7.8 billion was removed from equity funds and investors plowed $30.3 billion into cash, BofA said in a research note citing EPFR data. Investor sentiment is the worst it has been since the 2008 global financial crash, the note said.

MarketWatch

Dow futures slide nearly 400 points as dollar hammers rivals

U.S. stock index futures fell sharply early Friday, while the U.S. dollar climbed further against other major currencies, as the market continues to price in further Federal Reserve interest-rate hikes.

TipRanks

J.P. Morgan Says Stock Market Downside Risk Is Limited; Here Are 3 Stocks to Consider

A strong bearish trend defined the markets in the first half of the year; since then, the key point has been volatility. Stocks hit a bottom back in June, when the S&P 500 dropped into the 3,600s. That has proven to be a support level in the last three months, and at least one strategist believes that the market won’t go much lower from here. JPMorgan global market strategist Marko Kolanovic is taking a guardedly optimistic view of the coming year, noting: “We believe that any downside from here

Reuters

Goldman Sachs cuts 2022 target for S&P 500 by 16%

Analysts at Goldman Sachs wrote in a note late Thursday that the expected path of interest rates by the central bank is now higher than its previous estimate. “Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for that outlook,” wrote Goldman analyst David Kostin. The Fed indicated on Wednesday global policymakers would “keep at” their battle to beat down inflation, and hiked U.S. interest rates by 75 basis points for a third consecutive time and signaled borrowing costs would keep rising this year.

Bloomberg

European Gas Heads for Fourth Weekly Loss as Stockpiles Fill Up

(Bloomberg) — Natural gas prices in Europe headed for a fourth weekly loss, as ample supplies of liquefied natural gas help countries fill reservoirs days ahead of the start of the heating season.Most Read from BloombergJapan to Restore Visa-Free Travel From Oct. 11 as Covid Pandemic Recedes South Korea President Caught on Hot Mic Insulting US CongressBank of England Says Paper Banknotes Only Good for One More WeekUnless Rents Rise, Housing Is Set Up for an Epic CrashA Great Copper Squeeze Is C

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