This is what just happened that sent the stock market down 71% of the time, warns Credit Suisse

Wall Street is in an unusually bullish mood on Tuesday morning.

Tim Holland, chief investment officer at Orion Advisor Solutions, says the market has just hit two peaks. Last week, the Labor Department finally reported a permanently small drop in inflation, with a gauge of individual investor sentiment showing the largest proportion of retail investors heading down since 2009.

“If we see peak inflation and peak investor pessimism, the way forward for the market should be much more positive,” Holland said.

Not everyone is convinced. London-based Credit Suisse’s global strategy team has been cautious about equities since February – and they still are. They say the downside risks are still too high and there is no upside to their fair value models. Most importantly, the risks to corporate profits remain high.

Earnings revisions are starting to drop and 71% of the time when this happens, the markets go down over the next quarter. Existing PMIs point to a further significant decline in revisions. “We see a clear risk of negative EPS in 2023,” said strategists led by Andrew Garthwaite.

Sure enough, the markets bottomed out after a nearly 19.5% drop from their peak – the intraday low on the S&P 500 SPX,
-0.39%
It was accessed last Thursday — but on three of those four occasions, the Fed has been easing.

For the Credit Suisse team to turn bullish, it may require, to some degree, clear signals that Fed increases are constraining the economy.

“What do we need to see to be more constructive? Clear signs that wage growth is slowing in the US, key indicators in the US have fallen sharply, suggesting that the Federal Reserve needs to do a little more work to raise the unemployment rate above full employment, and signs On a new model that shows margins can remain high even as nominal GDP slows by [8 percentage points]clear cut understated [equity risk premium] model, or credit differentials that rule out stagnation,” Garthwaite and the team said.

commotion

Hong Kong listed stocks including JD.com JD,
-0.04%And
Daddy daddy ,
-1.72%
and NetEase NTES,
+ 0.85%
It rose as Shanghai made plans to reopen from a strict lockdown, including a full reopening by June 1. JPMorgan also upgraded a handful of US-listed Chinese technology shares on Monday.

Elon Musk said – via Twitter, of course – that his presentation to social media service TWTR,
-8.18%
It cannot move forward until the company provides more details about the percentage of spam accounts. CEO Parag Agrawal says he’s confident that spam accounts represent less than 5% of the user base, and the company said it was “committed to completing” the $54.20 per share deal in the agent’s statement. Separately, Musk may sell shares in SpaceX to help fund the show, the New York Post reports.

It’s a big day on the retail front, as Home Depot HD,
-0.01%
reported a sudden increase in same-store sales growth, but Walmart WMT,
+ 0.11%
Stocks are affected by the loss of earnings and lower expectations. The April retail sales report is expected to show an acceleration in spending, driven by auto sales. Also due to be released are the Industrial Production report and the Homebuilders Sentiment report.

Federal Reserve Chairman Jerome Powell is scheduled to appear at 2 PM ET at the Wall Street Journal’s Future of Everything Festival. A slew of regional Fed chairs are also scheduled to speak, from hawk James Pollard to dove Neil Kashkari.

Watch interviews with Powell and the CEOs of companies including Wells Fargo, Moderna and FanDuel. Register for virtual access to the Future of Everything Festival in The Wall Street Journal, May 17-19. (Select a default pass for free access.)

A flurry of 13-F reports were filed by major shareholders of the Securities and Exchange Commission. Berkshire Hathaway revealed new stakes in Citigroup C,
-0.38%And
Paramount Global Para,
-1.16%
and Celanese CE,
+ 1.52%And
Among other things. Chase Coleman’s Tiger Global Management, which has struggled this year, has cemented its stakes in several tech plays including CrowdStrike Holdings CRWD,
-6.33%And
sea ​​SE,
-6.72%And
snowflake snow
-8.75%And
service now,
-4.36%
and caravana as a shroud,
+ 0.23%.

markets

Markets seem to be flying high, as US stock futures ES00,
+ 1.52%

NQ00,
+ 1.95%
rose and dxy dollar,
-0.82%
He fell. Treasury returns TY00,
-0.30%

TMUBMUSD02Y,
2.640%
They also climb.

The most important indicators

Here are the most active stock market indices as of 6 AM ET.

ribbon

Safety name

TSLA,
-5.88%

Tesla

GME,
-6.70%

Jim Stop

AMC,
-0.85%

AMC Entertainment

TWTR,
-8.18%

Twitter

NIO,
+ 1.68%

New

AAPL,
-1.07%

apple

Mullen,
+ 18.28%

Mullen Cars

AMZN,
-1.99%

Amazon.com

Baba ,
-1.72%

Ali Baba

NVDA,
-2.50%

nvidia

graph

Correlation does not imply causation, and dual y-axis plots can be manipulated to show closer associations. So, with all these caveats in mind, US economists at Natixis point to the close correlation between mortgage rates and home prices, suggesting the potential for acute wealth effect risk.

However, they point out, the decline in home prices may not be as steep as the graph might suggest, due to both the national housing deficit due to both the massive housing boom and ongoing supply chain issues. The average single-digit correction in home prices over the next year is “completely reasonable”.

random readings

The US military allocates about $50,000 in bonuses to recruits, due to the salaries of companies like Target and Starbucks.

How Shanghai residents used Excel to beat the lockdown.

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