I backtracked US stocks amid grim economic warnings from Wall Street bank bossesat a time of growing fears about the effects of Federal Reserve policy on corporate growth and profits.
Falling shares of tech giants like Apple and Microsoft weighed heavily on the market, with the Nasdaq 100 down 2% and the S&P 500 posting a fourth consecutive loss on Tuesday.
All companies included in the KBW Bank Heavy Securities Index declined except for two companies.
As traders looked for safe havens, the dollar soared along with treasuries.
Goldman Sachs chief executive David Solomon warned of wage 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 chief executive, Jamie Dimon, predicts a “mild to severe recession” could occur next year.
Some of the biggest companies could 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 haven’t seen a trough in stock prices yet, and while this bout of equity market volatility will likely end in the coming months, profits are not yet. appropriate to the recessionary context.” .
However shaky the markets may seem, one indicator is strong in terms of analyst opinion on the companies they cover.
After cutting their stock price targets over the past summer at a rate unprecedented in history a few times, they are stepping back on their skepticism and reducing the number of draws against potential stocks to a level last seen at the start of the collapse in January, according to data compiled by Bloomberg and viewed by Al Arabiya.net.
Katie Nixon of Northern Trust Wealth Management believes the potential lack of earnings growth in 2023 could be a limiting factor on market performance given the already high level of valuation.
For his part, David Palin, chief investment officer at Citi Global Wealth, said, “Markets never bottom out before a recession starts.”
He added: “If there is indeed a recession next year and we see a rise in unemployment in the country, then we expect markets to stabilize where they are today in the coming months.”
