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Economic slowdown is “good news” for stocks: Strategist

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Economic slowdown is “good news” for stocks: Strategist

The U.S. Job Openings and Labor Turnover Survey (JOLTS) saw job openings fall to 8.06 million in April of 8.355 million in March, marking the lowest level since February 2021. Piper Sandler Chief Investment Strategist Michael Kantrowitz joins Market Domination to discuss the state of the job market and what it could signal for the Federal Reserve interest rate change.

“When you look at the broader employment data, from nonfarm payrolls to the unemployment rate, temporary jobs, hiring plans, layoff rates, etc., there has been an underlying slowdown going on for about a year. points are slower than they are strengthening,” explains Kantrowitz. He adds that this is “good news” for stocks as it helps calm inflation fears, explaining: “I think we have a long way to go before We have to worry about a really hard landing that will bring down stocks across the board.”

Kantrowitz notes that the negative correlation between rates and stocks will continue until inflation concerns improve. He expects two rate cuts by the end of the year and says economic factors such as low oil prices, high fiscal spending and a flexible labor market will help offset the impact of higher interest rates.

For more expert insights and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video transcript

The number of job openings in the US hit a new three-year low in April.

The latest sign of a cooling labor market ahead of Friday’s big jobs report, which weakens the labor market, could help bolster the case for the Fed to cut rates in 2024.

Our next guest expects two cuts with us by the end of the year.

Now to discuss all of this, Michael Kantrowitz, Mike Piper Sandler, chief investment strategist Michael.

Good to see you on set.

So let’s start there with the economic data, because we got more of it this morning and labor demand looks to continue to moderate.

It’s kind of, you know, this kind of general beat right now, maybe some softer data that we’re getting.

What do you think?

What does this mean for the market?

Yes, I think it’s more of the same as the chart you just showed, it was just a downtrend that has been going on for some time.

Uh There was a certain acceleration this month.

But, um, when you look at the broader employment data, from nonfarm payrolls to the unemployment rate, temporary employment hiring plans, quit rates, etc.

There is an underlying slowdown that has been going on for about a year.

It’s broadening, so there are more data points slowing than strengthening.

The story continues

Uh, I still think it’s good news for stocks as it helps contain inflation rates.

And I think we still have a long way to go before we have to worry about a really hard landing, bringing stocks down broadly.

Um, one of the charts in your last note I thought was really interesting where you talk about a possible generational shift in investor psychology and, you know, over the last decade we’ve had yields and stocks going in the same direction that reversed the few decades before that.

We’re now seeing another reversal where we’re going to see a renewed inverse correlation, but between earnings and equities and what is that, what does that mean?

What are the implications of this?

Yeah, you know, my whole career I started at approximately 0203. basically until COVID, we had a positive correlation between interest rates and stock prices.

Um, but that basically to me tells us that nobody is really worried about inflation and when rates go up, stocks, the economy is improving, markets are going up.

Um, again over the last 20 years, there hasn’t been a lot of concern that’s changed with COVID, it’s changed because of zero rates and these big financing refinance gaps that we have in commercial real estate, residential real estate, corporate credit.

So I think because of that, this negative correlation between rates and stocks is going to persist for a while longer, you know, in the seventies and eighties, it happened because we had very high levels of interest rates and inflation.

We don’t have really high levels.

We just have these big differences between rates because of zero interest rates.

So I think there’s a lot of reasons, but until we see investors not worried about higher inflation, higher interest rates, a rise in rates when the data improves.

Uh, I think we’ll continue to see that negative correlation, not literally every day.

I know that today yields have dropped a lot in the last few days, actually.

And stocks didn’t really react positively.

But, you know, if you run this correlation over a very short period of time, you’ll see that it changes a lot.

Whereas I look at about six months to really capture a regime and it’s been pretty negative over the last couple of years.

We mentioned that you expect two FED cuts this year.

And what, what if that, what if it didn’t come to fruition and you didn’t have cuts, would that change your view of the market?

Does the market need cuts to continue rising?

Uh, I think parts of smaller cap, you know, mid cap areas that don’t really have robust or broad earnings strength.

Yeah, I think regional banks, transportation stocks, real estate stocks, you know, it’s a long list.

Again, this all goes back to all these names that are rate sensitive.

The large-cap growth index?

Does the 500 need lower rates?

Not necessarily because there’s still earnings growth, will growth, uh, will, will stock prices rise as much without rate cuts or if the 10-year yield stays here?

No, I don’t think so.

Then.

Um, I think if rates stay where they are for longer, it’s more of what we’ve seen with this large-cap quality growth, leadership, small-cap value under performance.

And at the same time, even though we’ve gotten some, or maybe more than some, negative economic data right now, you again, in your most recent note, talk about maybe some stabilizing factors that are propping up the economy that give it a little bit of optimism that, I mean, maybe things aren’t fantastic, but maybe they’re not much worse.

Yeah, I’m taking a little bit of the bearish economic side and a little bit of the bullish economic side and kind of landing in the middle, um, of the bullish economic stories that, you know, oil prices are low.

We have a lot of fiscal expenses.

We have a flexible labor market, a strong wealth effect from the boomer generation and all of this will prevent a recession.

Well, maybe, but with all that said, we see the shocks data coming in weaker, we see, you know, weaker underlying earnings, when we look more broadly.

So we are seeing a slowdown with all of this, but perhaps that means a more moderate slowdown.

Perhaps this is why some, some like me and others last year, were wrong to call for an earlier recession because of these mitigating factors.

And so I think the golden environment today is that it continues to offset some of the high impact of higher interest rates and that we continue to work slower, and not fall off a cliff like the previous recessions that we’ve seen and Michael, we’ll sort it out. to add for viewers.

We are listening now.

Um, given that kind of point of view that you have, where do you see opportunities in the stock market?

What are you examining?

Still, you know, quality companies with higher profitability?

Uh, I think one of the interesting sectors is public services.

Uh, I kind of said I could play Iron Man, uh, offense and defense.

It’s a football reference, uh, American football.

Uh, so the utilities have certainly been on the attack over the last couple of months, playing with the AI ​​kind of story and the drop in ’47 yields about a month ago.

And if things get worse and the bad news becomes bad for stocks and, uh, I assume rates would come down and utilities might be your kind of safety play, uh, since they have the most earnings scenario. stable.

So other than that sector, generally just looking for stocks in different sectors and industries that have the best earnings momentum relative to their peers and, and very quickly, utilities is unusual because it’s already had a run.

Even rates didn’t fall because of all this.

Now a thesis on them too, but do you think they have more room to move forward if rates fall.

Yes, I think if we end up having a sharp recession, things will get worse.

Utilities will be the last part of the market that will remain there.

Maybe, again, maybe not the AI ​​stocks that led the change, but you will see a rotation within utilities into more stable securities like stocks.

And that’s perfect because today we have our manual on public services.

So we’ll also get some specific names of people on how to play this.

Thank you very much.

Good to see you.

You too, thank you for being here.

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We are the editorial team of FinCrypto, where seriousness meets clarity in cryptocurrency analysis. With a robust team of finance and blockchain technology experts, we are dedicated to meticulously exploring complex crypto markets with detailed assessments and an unbiased approach. Our mission is to democratize access to knowledge of emerging financial technologies, ensuring they are understandable and accessible to all. In every article on FinCrypto, we strive to provide content that not only educates, but also empowers our readers, facilitating their integration into the financial digital age.

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Breakfast on Wall Street: The Week Ahead

FinCrypto Staff

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Wall Street Breakfast profile picture

The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).

The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.

In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.

Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.

Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.

Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.

Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.

Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.

IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.

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Trump shooting: Gold could hit record high, dollar and cryptocurrencies set to jump

FinCrypto Staff

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Police cars outside the residence of Thomas Matthew Crooks, the alleged shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. In the aftermath of the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being killed by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)

Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)

Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.

“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”

Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.

An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.

Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.

Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.

Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.

“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.

Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.

But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.

Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.

“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”

Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.

“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”

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Latest Business News Live Updates Today, July 11, 2024

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Latest Business News Live Updates Today, July 11, 2024

Follow us for stories on Bill Gates, Elon Musk, Mukesh Ambani, Gautam Adani as we bring you everything that’s happening in the business world. Follow the latest gold and silver prices here too. Stay in the know on all things business with us.

Latest news on July 11, 2024: Airtel says its new Xstream Fiber plans bundle over 350 live TV channels (Official Photo) (Reuters) Disclaimer: This is an AI-generated live blog and has not been edited by Hindustan Times staff.

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News / Business / Latest Business News Live Updates Today, July 11, 2024

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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?

FinCrypto Staff

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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?

Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.

Jio Financial Services News

Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”

“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.

Jio Financial Stock Target Price

Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”

On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”

Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.

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