There's no simple story to tell about the current market moment: Morning Brief
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Tuesday, August 23, 2022
Today's newsletter is by Myles Udland, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn.
There's a ton going on in markets right now.
Stocks got smoked to start the week, with the summer rally appearing to have stalled.
The tech-heavy Nasdaq is now down a quick 5% in just a few trading days after rallying about 25% from mid-June to mid-August.
On Monday, the S&P 500 endured its worst day since June 16, a date that probably sounds familiar to market enthusiasts — it's the same day the S&P 500 hit its most recent bottom.
Treasury yields are rising as investors ratchet up bets the Fed won't change course imminently. Still, the yield curve remains deeply inverted, a situation that has typically preceded recession.
The dollar is back near 20-year highs against the euro as the euro once again traded below parity with the dollar on Monday as concerns grow about the economic outlook in Europe.
And the economic situation in China, which is always a challenge to completely suss out, appears to be deteriorating amid historic droughts, COVID lockdowns, and persistent risks from its real estate sector.
The recent resurgence of the meme trade continued to fall apart on Monday, with shares of AMC (AMC) falling 42% after the company's new preferred stock units — ticker: $APE — started trading. Those units also fell 12% to start the week.
Bed Bath & Beyond (BBBY) also continued its recent collapse, falling another 16% to close at $9.24. Last Wednesday, shares closed at $23.08. By then, Ryan Cohen had already bailed on the stock.
Put it all together, and things don't look so great: Indices are going down, individual stocks are blowing up, and recession is increasingly being priced in.
Go back in time about two weeks and the opposite was true: Investors were buying, meme trades were roaring, and recession fears were fading.
For some time now, a common refrain we've heard from investors and strategists is that if you have a simple view of what's happening in markets and the economy right now, you are mistaken.
Go down the list of negatives in today's market and you're likely to find an equal, opposite, and positive indicator on the health of this market rally and economic expansion.
Inverted yield curve? Go look at the strong labor market.
Two quarters of negative GDP growth? It was just an inventory drawdown.
Gas prices falling on a lack of demand? Savings for consumers to spend money elsewhere.
Of course, to say today's market is full of diverging views arguably describes any market on any day.
But oftentimes disagreements among investors center on the path as opposed to the destination for markets and the economy. Market history tells us stocks usually go up — betting on how much and which names lead the way is where careers are made and lost.
Today, it seems, something much bigger is at stake.
What to Watch Today
Economic calendar
S&P Global U.S. Manufacturing PMI, August preliminary (51.9 expected, 52.2 previously)
S&P Global U.S. Services PMI, August preliminary (50 expected, 47.3 previously)
Richmond Fed manufacturing index, August (-5 expected, 0 previously)
New home sales, July (-2.5% expected, -8.1% previously)
Earnings
Yahoo Finance Highlights
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