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Tech Stocks Drive Selloff as Bank CEOs Sound Alarm: Markets Wrap

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(Bloomberg) — Stocks slumped amid downbeat economic warnings from bank chiefs at a time when concern about the impacts of Federal Reserve policy on growth and corporate earnings is running rampant.

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A slide in tech giants like Apple Inc. and Tesla Inc. weighed heavily on the market, with the S&P 500 falling for a fourth straight session. Meta Platforms Inc. tumbled 6% on a report the European Union is targeting the Facebook owner’s ad model. The dollar saw a back-to-back advance, while oil tumbled.

Goldman Sachs Group Inc.’s David Solomon warned about pay and job cuts amid an uncertain outlook, citing “some bumpy times ahead.” Bank of America Corp. is slowing hiring as fewer employees leave ahead of a possible economic contraction, chief Brian Moynihan said. JPMorgan Chase & Co.’s Jamie Dimon told CNBC a “mild to hard recession” may hit next year.

“We have not yet seen the bottom on equity prices,” said Lauren Goodwin, portfolio strategist at New York Life Investments. “While this phase of equity market volatility is likely to end in the next few months, earnings have not yet adapted to a recessionary environment.”

Morgan Stanley Wealth Management’s Lisa Shalett said some of the biggest companies may see earnings hit far more than expected next year as economic growth slows and inflation erodes the purchasing power of consumers.

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“A lot of corporate guidance is delusional,” Shalett, the division’s chief investment officer, told Bloomberg Television. “It’s going to be a rude awakening for a lot of folks.”

To Katie Nixon at Northern Trust Wealth Management, the potential lack of earnings growth in 2023 may be a limiting factor to market performance amid the already elevated valuation level.

After slashing their share-price targets over the summer, analysts are rolling back their skepticism and reducing the number of decreases relative to increases to a level last seen at the onset of the rout in January, data compiled by Bloomberg show.

While this sentiment shift may not be particularly relevant for those who view the sell-side crowd as overly optimistic, it’s still a net positive. To Willie Delwiche at All Star Charts, the key is to see a drop in target cuts paired with a spike in share-price upgrades — a sign that pessimism has gone too far.

“Markets have never bottomed before a recession has begun,” said David Bailin, chief investment officer at Citi Global Wealth. “If there is in fact going to be a recession next year, if we are going to see a period of unemployment rising in the country, then we would expect that markets would have to settle down from where they are today over the course of the next several months.”

Key events this week:

  • EIA crude oil inventory report, Wednesday

  • Euro zone GDP, Wednesday

  • US MBA mortgage applications, Wednesday

  • ECB President Christine Lagarde speaks, Thursday

  • US initial jobless claims, Thursday

  • US PPI, wholesale inventories, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 1.3% as of 12:37 p.m. New York time

  • The Nasdaq 100 fell 1.7%

  • The Dow Jones Industrial Average fell 1%

  • The MSCI World index fell 1.2%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%

  • The euro was little changed at $1.0486

  • The British pound was little changed at $1.2186

  • The Japanese yen was little changed at 136.77 per dollar

Cryptocurrencies

  • Bitcoin was little changed at $16,955.97

  • Ether fell 0.7% to $1,250.62

Bonds

  • The yield on 10-year Treasuries declined one basis point to 3.56%

  • Germany’s 10-year yield declined eight basis points to 1.80%

  • Britain’s 10-year yield declined three basis points to 3.08%

Commodities

  • West Texas Intermediate crude fell 3.6% to $74.16 a barrel

  • Gold futures rose 0.1% to $1,783.40 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Vildana Hajric, Isabelle Lee, Emily Graffeo, Elena Popina and Eva Szalay.

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©2022 Bloomberg L.P.



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