The Economy is going through a Recession: A CNBC Analysis of the JPMorgan Chase Investors’ Dilemma and Other Insights
“You can’t talk about the economy without talking about stuff in the future…and this is serious stuff,” Dimon said in the CNBC interview. He added that he thinks Europe is in a recession already and that the US is probably next.
One of the 30 stocks in the ’40s was the culprit behind the 1% drop in shares of JPMorgan Chase. JPMorgan Chase
(JPM) is one of several big banks that will report earnings on Friday.
Stocks have tumbled this year due to worries about inflation and how the Federal Reserve’s aggressive interest rate hikes to fight surging prices may eventually lead to a recession. The market appeared to have bottomed last week, after stocks soared.
But sellers have returned with a vengeance in the past few days. Friday’s mostly solid jobs report did little to dispel fears about more big rate hikes from the Fed.
The Nasdaq hit a new 52-week low Monday. The S&P 500 is not far away from its lows. The Dow is down about 20% this year and is back in a bear market along with the other two major market indexes.
While the bond market was not open on Monday, the 10-year Treasury yield is hovering around 3.89%. The 10-year yield, which heavily influences the direction of mortgage rates, briefly topped 4% late last month and hit its highest level since October 2008.
Longer term the rate hikes of the Fed may slow consumer spending. The housing market is one area that has already been hit hard by the central bank’s aggressive tightening.
Policy actions to date will have their full effect on activity in the coming quarters, according to Brainard. In other words, the rest of the economy could soon slow.
The New Year: The Elusive Season Revisited for a Long-Term Consumers’ Need of Some Good Croove
Retailers clearly need some good cheer around the holidays. Consumer stocks have been hit hard this year due to inflation worries and recession fears, plunging even more than the broader market.
The week will include important economic data. Wednesday will bring the minutes from the Fed’s last meeting, and a second revision of GDP will come out on Thursday. On Friday January’s Personal Consumption Expenditures – the Fed’s preferred inflation gauge, will be released.
The most recent Consumer Price Index figures for October gave some relief to shoppers. The stock market rallied on Thursday after the pace of year-over-year price increases slowed more than expected.
Several major retailers are also on tap to report their results for the latest quarter…and potentially give outlooks about sales for the next few months. The earnings calendar has Walmart, Target, TJ Maxx and Marshalls owner, TJX, and Macy’s on it.
The Good, the Bad, and the Ugly: Predicting a Slowdown in Consumer Credit Card Prices with Moody’s
Credit card rates have gone to all-time highs due to the Fed’s rate hikes. So it will be costlier than ever for many consumers looking to buy gifts this year with their Visas and Mastercards. Black Friday, after all, is less than two weeks away.
Consumer spending accounts for about 70% of America’s gross domestic product, the broadest measure of the US economy, so a slowdown could weigh on growth and even send the United States into a recession.
According to Moody’s, retailers have been able to easily pass on rising producer prices to consumers.
Victoria’s Secret, ANH Apparel and Gap are among the top holdings of the xRT, which is down 25% this year.
Some experts are concerned that retailers will continue to be in trouble in the near future. People may eventually need to watch their pocketbooks more closely in order to stay out of a downturn.
In our view, earnings estimates are a little too high, and that’s what makes us cautious. On a recent conference call, a portfolio manager at Franklin Templeton said that the numbers need to come down with slowing growth.
Some parts of the consumer discretionary sector would require earnings estimates to be brought down a little more.
The Fourth Quarter Earnings of Home Depot: Implications for the Housing Starts and Construction Permittances for October 2021
The data on housing starts and building permits for October will be released at the end of this week. There will be figures for existing home sales. According to the economists surveyed by Reuters, 4.2 million homes were sold last month. That would be down from 4.7 million homes in September and 6.3 million in October 2021.
The housing market may not necessarily be in the midst of a spectacular collapse like it was in the late 2000s after a subprime mortgage craze fueled a massive bubble. Home sales are losing steam.
Home Depot boosted its hourly wage for employees and its stock dividends after reporting a record earnings for the fiscal year that ended in January. But the company missed revenue expectations for the first time in more than a year, in the fourth quarter.
The home improvement chain said it isn’t taking a hit because of the weakness in the home sale market caused by higher mortgage rates. CFO Richard McPhail thinks the company could be using the current housing market as an advantage because homeowners have more incentive to fix up their homes rather than move.
The number of overall transactions fell 3% from the same period of 2021. The increase in prices was the main factor in offsetting the drop. Home Depot said customers spent an average of more than $90 when shopping, up 9% from a year ago.
Wall Street Sentiment Can Change on a Dime: The Dow Jones Declined by a Long Day of Work in the Last Three Decades
President Biden will meet with China’s leader at G20 and earnings from Tyson Foods and Oatly will be reported.
Tuesday: US producer price index; earnings from Walmart, Home Depot, Tencent Music
(TME), Energizer
(ENR), Krispy Kreme and Advance Auto
(AAP)
The sell-off has been broad, only 12 companies in the S&P 500 are trading in the green. Real estate and energy sectors have been hit the hardest the hardest, down more than 3.3% and 2.1%, respectively.
That excitement continued right up until Fed Chair Jerome Powell crashed Wall Street’s party Wednesday with some tough news: Economists at the Fed believe US gross domestic product, the broadest measure of America’s economy, will barely grow next year. And they predict the US unemployment rate will rise to 4.6% by the end of 2023, which means roughly 1.6 million more Americans will be out of work.
Sentiment on Wall Street can change on a dime, and this week is clear evidence of that: The Dow has tumbled about 1,300 points since the Fed’s policy update at 2 p.m. ET Wednesday. It is December and not helping stocks. Volume is low and small moves can get exacerbated if traders are on vacation.
The Rise and Fall of the US Consumer: Adobe, Meta, and McPhail in the Light of Wall Street Data and Wall Street Forecasts
The markets largest gainers today are Adobe and Meta. Adobe shares shot up after the company reported better than expected results. The company saw a tick after it was upgraded to neutral from overweight by JP Morgan.
Concerns about the strength of the US consumer were raised after fourth-quarter earnings and forecasts from mega retailers like Walmart and Home Depot.
Recent economic data has been strong. But sticky inflation and, now, warnings from bellwether retail companies like Walmart and Home Depot have traders worried that the already hawkish Fed will keep rates higher for longer.
“The consumer is still very pressured, and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods,” Walmart CFO John Rainey said during the earnings call. The rest of the year is a cautious one, because of that.
“Over 90% of US homeowners either own their homes outright or have fixed rate mortgages under 5%,” McPhail said. There is no incentive to sell and move to a higher rate mortgage. In fact, the incentive is there to improve.