The S&P 500’s clear bearish advance didn’t last, even as PACW’s woes pointed to an unsettled banking situation as did increased Fed lending to banks (now over $90 billion, up $10 billion this week). This comes as the original incentive to withdraw deposits in search of better yields in Treasuries and money market funds still exists – the 3m yield is at 5.20% after a two-day slump, while the 6m is at 5.14%. This has a profound impact on the ability of commercial banks to provide credit, the lifeblood of the real economy, as commercial real estate remains in the wings.
While we haven’t yet seen a true earnings recession (data not yet well below lowered expectations for Q1), we are at the trough for P/E declines as LEIs continue to trend lower, the Fed remains tight, and market leaders prefer to squeeze value sales, while volume sales aren’t exactly growing (ie the pie isn’t growing much) while they’re doing share buybacks to increase profitability (EPS).
So far, no weakness outside of Big Tech has been able to force the S&P 500 down much — so the question is what would shake tech up a bit. As I wrote earlier, any straw can break the camel’s back – it may or may not be the big straw.
The USD is similarly in a vulnerable position, buoyed by the debt ceiling drama that is slowly coming into focus (more next week). A break of key support above 101, which could signal a significant downside, will likely see the dollar rally firmly above 102, which would of course continue to put pressure on real assets, as it did yesterday for precious metals and copper. Note that cryptocurrencies have been indicatively weaker for some time, so this sums up the cross-market case of what to expect supplies in the coming weeks.
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Let’s move straight to the rankings – today’s complete article contains 6 of them.
S&P 500 and Nasdaq outlook
It’s not a measly “improvement” to market breadth either – that announcement is pending today after the deadline. The key question is how much more upside buyers can squeeze out (4,188 or more).
A pretty humbling chart showing the waning strength of this bear market rally. At the very least, we are in for a serious decline on all technical and fundamental grounds before we move into the good performance time of Q4 2023.
