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A bear market catalyst is awaiting stocks, UBS warns



If you listened to some stats, you might see a bullish session on Monday and a new record for the S&P 500

SPX, + 0.56% ,

In addition to the historical models that followed, Wall Street encouraged trade chats and profits in turn. But Tuesday looks tougher as investors face disappointing results from Alphabet, Google's parent company, while Apple

AAPL, + 1.00%

and Facebook

FB, + 0.80%

report revenue on Wednesday.

We are also on a day of potential reduction in Federal Reserve interest rates. Some expect this to help the stock recover its rocky start in October.

But our call of the day from UBS strategists warns that a big threat is to wait for stocks: earnings expectations.

"Every bear market in the last 50 years has witnessed a real decline in S&P 500 upfront revenue," says lead strategist Francois Trahan, who presents a worsening landscape in a note to customers.

He says that the consensus between the annual growth rate of S&P 500 upfront revenue has fallen to just 1

% from a peak of 23% in September 2018 and leading economic indicators that predict future activity and may provide clues for future Income trends also hint at greater weakness ahead, as this chart shows:


"Ultimately, the most vulnerable macro stock backdrop emerges when earnings growth turns negative as LEIs move downward. (pushing [price-to-earnings] lower), "says Tr Khan, who offers yet more sinister graphics:


He also suggests that investors should not count on the Fed throwing stocks here, as interest rates and stocks are positively related at the moment, which means that if interest rates are lower, stocks will follow, as has been the reaction after the last two cuts.

The Market

Dow

YM00, -0.17% ,

S&P

ES00, -0.08%

and Nasdaq

NQ00, -0.02%

futures do not show much movement, while European stocks

SXXP, -0,41%

are in red. Asian markets

ADOW, + 0.48%

finished mixed.

Graphics

Indigenous plant alternatives are rage, but shares in one big company in this space, Beyond Meat

BYND, + 4.56% ,

got a bad reception at the end of Monday until the first profit in company history, as our chart for the day shows.

MarketWatch

As of late Monday, Beyond Meat's shares, which debuted on Wall Street in May, were down 55% from the high of $ 234.90 on July 26.

MarketWatch

A Brief History of Beyond Meat
The Buzzing

Profit from the Manufacturer of Printers and Copiers Xerox

XRX, + 0.92% ,

drug companies Merck

MRK, -0.07%

and Pfizer

PFE, + 1.39% ,

General Motors

GM, -0.27%

and Kellogg Food Company

K, + 0.28%

upon completion, Amgen biotechnology results

AMGN, + 0.97%

AMGN, + 0.97% ,

video game maker Electronic Arts

EA, + 0.43%

and toy maker Mattel

MAT, + 1.28%

are due.

Alphabetical Shares

GOOGL, + 1.95%

are excluded after missing profits (read all about the recent profit of company expenses ). And in stock at Grubhub food delivery group

GRUB, -1.07%

has been ruled out for disappointing results.

Watch BP

BP, -0.28%

BP, -3.17%

shares after the oil and gas giant turned into a huge loss.

Pacific Gas & Electric

PCG, -24.00%

says that his power lines may have started two fires; it will cut more electricity on Tuesday as several flames burn in the state.

Economics

Case-Shiller housing prices, consumer confidence and pending home sales are forthcoming. The Fed's two-day meeting, which is expected to lead to a reduction in interest rates, also begins.

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