Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

It May Be Time For Stocks To Worry About A Recession

By Michael KramerStock MarketsMar 04, 2022 03:10AM ET
www.investing.com/analysis/it-may-be-time-for-stocks-to-worry-about-a-recession-200619276
It May Be Time For Stocks To Worry About A Recession
By Michael Kramer   |  Mar 04, 2022 03:10AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Believe it or not, despite the big rally on Wednesday, the S&P 500 was down about 50 bps for the week yesterday, with the Qs down 1%. It’s just odd, given how much we rallied on Wednesday.

So let’s see, when we left off, we were getting ready for Jay Powell to get in front of Congress. It amazes me how one market can hear one thing and how another market can miss the whole message. The bond and currency markets, which are far smarter than equities, responded in a manner that one would expect when the Chair of the FOMC says things like: he intends to raise rates 25 bps in March. Or is open to possibly more than one rate hike at future meetings and may need to tighten above the neutral rate to bring inflation back under control.

Then you have the equity market, which is certainly not the sharpest tool in the shed for Fed messaging. Yet, it managed to focus on the part about only a 25 bps hike in March and rallied, totally missing the more important message.

Yields

So what happened? Well, what I said would happen, bond yields were offside and saw a massive sell-off on the front of the curve, with the 2-year climbing to 1.52% from 1.28%.

US Government Bonds 2-YR Yield Chart
US Government Bonds 2-YR Yield Chart

But perhaps more important is that the 10-year has not to kept pace, resulting in the ten minus two-year spread dropping below 40 bps, and now trading at just 31 bps. At this point, the spread could be heading straight for ten bps. A move like this should get the market to think about the rising chances of a recession.

US10Y-US02Y Daily Chart
US10Y-US02Y Daily Chart

Oil and Dollar

If that doesn’t freak the market out, then a soaring US dollar and oil prices are the only things better than a potential yield curve inversion. It only takes one to kill global growth; when you get both, the odds of recession seem high.

USD Index Daily Chart
USD Index Daily Chart

So let’s think about this, the dollar and oil are soaring, the Fed is talking about raising rates, running off the balance, and the potential to push rates beyond neutral? How is the equity market not freaking out?

S&P 500

The SPY has been range-bound. The patterns have been hard to identify, which happens with a range-bound market. So I feel like I’m grabbing to find something. If tomorrow’s job report shows that wage inflation is taking hold now, I think fears of stagflation will take hold, but it is a recession one needs to worry about. I think the S&P 500 drops below 4,350 and tries to fill that gap at 4,300. Once that happens, I think we are on our way to below 4,200.

SPX Chart
SPX Chart

Tesla

Perhaps Tesla (NASDAQ:TSLA) is giving us a preview. The stock already fell below $840 and looks well on its way to the gap fill at $810.

Tesla Inc Chart
Tesla Inc Chart

Zoom

Zoom (NASDAQ:ZM) has been a pretty good leading indicator for the market, and today it made another lower low and probably a signal of the NASDAQ’s eventual drop too. For Zoom, $107 seems like the destination.

Zoom Video Inc, Daily Chart
Zoom Video Inc, Daily Chart

NASDAQ

Talking about the NASDAQ, it’s awful when the number of new stocks making new highs-new lows on a cumulative basis is making new lows every signal day. I don’t see how the market sees a meaningful rebound until this indicator flatlines. That is what has indicated bottoms in the past.

NAHL Cumulative Chart
NAHL Cumulative Chart

Aren’t you glad I’m back?

Original Post

It May Be Time For Stocks To Worry About A Recession
 

Related Articles

It May Be Time For Stocks To Worry About A Recession

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
Ellen Mitchell
Ellen Mitchell Mar 04, 2022 2:28PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes, very glad, Michael, especially when I agree with ALL your points.  The yield spread, 19 BP, is somewhat alarming although timing of recessions after the inversion is random.  The grand mistakes, thinking this was supply inflation and supply inflation will correct itself, the Fed made is priceless.  It will be added to the long list of errors they have already made through the years.
Carlos Escobar
SELLxTHExTOP Mar 04, 2022 1:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
nasdaq will be 16000 faster than you can sit at your computer to write a new article
Mario tragik
Mario tragik Mar 04, 2022 8:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
lmao this guy
Damian Wahner
Damian Wahner Mar 04, 2022 6:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
As always your well prepared with your research, in total agreement, another well timed article.
Havier Xavier
Havier Xavier Mar 04, 2022 6:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
glad you're back. would love an article letting us know not only when you were right...but also when you missed the mark. like a quarterly report card!
Ahmad Khalid Noorzai
Ahmad Khalid Noorzai Mar 04, 2022 5:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I think everyone is glad u r back, everyone will appreciate ur thoughts and ideas about Nasdaq, Dax and Dow on weekly basis.
Shep De
Shep De Mar 04, 2022 4:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very well said, obviously some don't get the complexity of understanding that this author intellectually makes. Great graph analysis too.
Hank Reardon
Hank Reardon Mar 04, 2022 3:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You don't need charts to see that, captain obvious.
Omid Sanaei
Omid Sanaei Mar 04, 2022 3:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Great article
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email