I backed off US stocks amid grim economic warnings from Wall Street bank chiefsat a time when concerns are growing regarding the effects of Federal Reserve policy on growth and corporate profits.
The decline in stocks of tech giants such as Apple and Microsoft weighed heavily on the market, with the Nasdaq 100 down 2% and the S&P 500 suffering a fourth straight loss on Tuesday.
All companies included in the KBW Bank Heavy Securities Index declined except for two companies.
As traders sought safe havens, the dollar rose along with treasuries.
Goldman Sachs CEO David Solomon warned of pay and job cuts, noting “some tough times ahead”.
For his part, Bank of America President Brian Moynihan said the bank is slowing hiring with fewer employees leaving ahead of a potential economic downturn.
As Morgan Stanley embarks on a new round of job cuts, the bank’s CEO, Jamie Dimon, predicts that a “mild to severe recession” might occur next year.
Some of the biggest companies might see much more earnings than expected next year as economic growth slows and consumers’ purchasing power erodes, said Lisa Shalit of Morgan Stanley Wealth Management.
In turn, Lorraine Goodwin, portfolio strategist at New York Life Investments, said: “We have not yet seen a bottom in stock prices, and while this stage of stock market volatility is likely to end in the next few months, profits have not yet adjusted to the recessionary environment.” .
As shaky as the markets seem, one indicator is strong in terms of analysts’ view of the companies they cover.
After slashing their stock price targets over the past summer at a pace unheard of in history handful of times, they are stepping back on their skepticism and reducing the number of drawdowns compared to potential stocks to a level last seen at the start of the crash in January, according to the data. Compiled by Bloomberg, and viewed by Al Arabiya.net.
Katie Nixon of Northern Trust Wealth Management believes that the potential lack of earnings growth in 2023 might be a limiting factor for the market’s performance amid the already high level of valuation.
For his part, David Palin, chief investment officer of Citi Global Wealth, said: “Markets never hit a bottom before a recession begins.”
He added, “If there is in fact a recession next year and we see a rise in unemployment in the country, then we expect that the markets will have to stabilize where they are today over the next several months.”
