This is what Black Friday carnage could mean for stock market trading on Monday, analysts say.
New, fast-spreading coronavirus B.1.1.529 strain declared a worrisome variant by the World Health Organization Global markets rocked on Black Friday, raising concerns about how the economy and Wall Street could perform next week, after a sell-off wiped out the S&P’s November gains. 500
and Nasdaq Composite
and submit the Dow Jones Industrial Average
biggest single-day drop since October 28, 2020.
The WHO says the omicron variant, which has been detected in Belgium, Israel and Hong Kong and was first identified in southern regions of Africa, is more transmissible than the currently dominant delta strain. worldwide and other variations.
The emergence of the new race led to the White House Announcement of restrictions, starting Monday, travel for non-US citizens and residents from South Africa, as well as from Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi, joining the European Union, United Kingdom, Singapore and Japan, also announced Similar travel ban.
The market sell-off during the abbreviated Black Friday session, and the commensurate flight to assets that investors hoped would outperform amid new mobility restrictions, helped overshadow the The usual focus is on retail, on a day associated with large consumer spending ahead of the Christmas holiday. Friday’s downturn also offered a stark reminder that the path of markets and the economy depends on the course of COVID.
What is not clear is whether the latest coronavirus development will cause long-term harm to the skin of the market. Omicron comes at a fragile time for bullish investors, with bears pointing to sky-high stock market valuations, inflation worries and global economic growth concerns as reasons. to expect a decline in the stock managed to avoid a drop from a peak of more than 5%.
In theory, Friday’s post-Thanksgiving environment is traditionally lightly traded and therefore prone to excessive price volatility.
Nasdaq had its lowest volume of the year on Black Friday, with 3.479 billion shares traded, well below the annual average of 5.099 billion. Total aggregate volume, including transactions on Intercontinental Exchange
-the platforms NYSE has ownership, is 8,760 billion, compared with an annual average of 11,196 billion, according to Dow Jones Market Data.
However, only time will tell whether the response to omicrons is a textbook, a knee-jerk bribe, or something more sinister.
MarketWatch’s Bill Watts wrote, citing research Friday from Mark Arbeter of Arbeter Investments, that the next level of support to watch for the S&P 500 follows. closed at 4,594.62 on Friday at 4,570, the 50-day exponential average; 4,566, 38.2% retracement of the rally; and 4,550, the previous high from early September.
“It is too early to know to what extent the new variant will affect economies and markets, and Friday’s market moves could be exacerbated by reduced liquidity due to the Thanksgiving holiday. U.S. grace and risk of more bad news looming over the weekend,” Jonas Goltermann, senior market economist at Capital Economics, wrote in a Friday research note.
JC Parets of the All Star Charts blog writes that things could turn sour if the S&P 500 is pushed below 4,500, with little support below that point.
“You know how your parents always tell you that nothing good will happen after midnight? In the S&P 500, nothing good happens below 4500,” he wrote in a blog Friday.
“If we were below that there would probably be a much bigger problem and the 18-month heaviest cash positions would be warranted,” Parets wrote.
Some analysts say there are good reasons for the insecurity, on the public health front.
Michael Strobaek, global chief investment officer at Credit Suisse, wrote in a research note: “The reality is that this variant appears to be spreading much faster than previous versions (including the Delta variant). . There are some questions about the effectiveness of existing COVID vaccines from Pfizer
due to the number of mutations that the omicron variant carries on the mutant protein. The mutant protein is part of the virus targeted by the COVID-19 vaccine.
Jefferies analyst Sean Darby notes that risk appetite has softened ahead of Black Friday and the sell-off could be a “tipping point” in favor of caution and aversion. NS.
“News of a new or not so new COVID variant is spreading in South Africa
Jefferies analyst writes.
“However, there has been a large shift in risk variables over the past month – a
the number of ‘treasury tail auctions’ is increasing, equity market breadth is decreasing, and
The imperceptible change in US retail taste seems to have gone unnoticed.
Positioning on the global stock market is one of the most aggressive in US history,” according to Darby and his colleagues.
Jefferies research shows that investors now expect that the Federal Reserve, under outgoing Chairman Jerome Powell, will accelerate the pace of reductions in central bank asset purchases, which will resulting in tighter financial conditions that may not be in favor of risky assets. Goldman Sachs sees the Fed going up and down to $30 billion per month from a $15 billion drop, and estimates three policy rate hikes by 2022, up from two.
“Ultimately, the Sharpe ratio – a measure of return per unit of risk – is
turned to global stocks. We expect the gap between the performance of risk-haven and safe-haven assets to narrow,” Jefferies wrote.
However, the situation could still present a buying opportunity for bold investors.
Strobaek wrote that “risky assets like stocks have the potential to offer some strength, but we would view this as an opportunity in specific and select areas.”
“At this point, we reiterate our assessment from the Investment Committee’s latest report, which is to keep equities slightly overhang in the portfolio and government bonds lower. ,” wrote Credit Suisse’s CIO.
Analysts at Citigroup also said that “we will buy on any dip,” noting that its bearish checklist shows no significant red flags. “Valuation looks to be lingering, but other factors (credit spreads, capital flows) have not been particularly wide open,” Citi writes, with 7.5 out of 18 red flags raised in global market measures while the US is 9.5 out of 18.
Greg Bassuk, Managing Director at AXS Investments in Port Chester, NY says that the weekend sale could lead to a Black Friday sale for stock market investors.
“Black Friday is often the unofficial kick-off to the annual holiday shopping season. But we believe the real shopping is for stocks that have suffered a drop in price due to Covid infections, inflation fears and supply chain woes, but that still possess strong fundamentals that will drive boost their profits when the economy finally reopens,” he wrote
That said, some analysts note that outages taking place in Europe and the spread of COVID, even before the declaration of omicrons, are reasons for caution as they will affect impact on global growth prospects.
Either way, it looks like a level of foreshadowing could take effect next week and could set the tone for trading for the rest of 2021.
Trading on Monday will help determine if the uptrend remains or whether a bearish phase is crystallizing.
It will be a week of jobs focus, with the US November jobs report due later in the week and Powell and others offering their final thoughts ahead of the ban. communication begins before the final meeting of the Federal Open Market Committee in 2021. on December 14-15.
See: Fed’s inflation fears at last meeting leave room for faster tapering of bond purchases
Santa Claus rally, anyone?
What is the economic calendar?
A report on home sales is pending at 10 a.m. Eastern Time
S&P Case-Shiller Home Price Index for September at 9 a.m
Chicago Purchasing Managers Index for November at 9:45 a.m
Consumer Confidence Index for November at 10am
November ADP jobs report at 8:15 am
IHS Markit Purchasing Managers Index last read at 9:45 am
ISM Manufacturing Index for November at 10am
Construction spending for October at 10 a.m
Beige book at 2 pm
Weekly jobless claims report for the period ending November 27 at 8:30 a.m
November Non-Farm Payrolls Report at 8:30 a.m.
Read IHS Markit Non-Production for November at 9:45am
ISM service report for November at 10am
October factory orders at 10 am
Major capital goods orders updated for October at 10 a.m
Fed President Jerome Powell delivering the opening keynote at 3:05 p.m. ET at the “Introducing New York Center for Innovation” event.
Fed Gov. Michelle Bowman speak at a virtual symposium on Indigenous economies hosted by the Bank of Canada, the Tulo Indigenous Economy Center and the Reserve Bank of New Zealand at 5:05pm
Powell to testify before the US Senate Committee on Banking at 10 a.m., along with the Secretary of the Treasury Janet Yellen, on the state of the US economy amid the COVID pandemic as part of the Cares Act.
Fed Vice Chairman is about to leave Richard Clarida spoke at 1 p.m. at an event hosted by the Federal Bank of Cleveland.
Fed governor is about to leave office Randal Quarles will give farewell thoughts at the American Enterprise Institute at 11 a.m
https://www.marketwatch.com/story/heres-what-the-black-friday-carnage-may-mean-for-the-stock-markets-trade-monday-analysts-say-11638021516?rss=1&siteid=rss This is what Black Friday carnage could mean for stock market trading on Monday, analysts say.