Similar to the buzzy intrigue behind the mashup viewing of the tonally different Barbie and the Oppenheimer movies, the market is rallying to its own oddball double feature: higher interest rates and economic uncertainty.
What could go wrong? That is what some stock-market specialists are wondering.
On Friday, the Dow Jones Industrial Average DJIA, -0.13%
notched a 10th consecutive positive close, marking the longest win streak for the blue-chip benchmark since Aug. 7, 2017, according to the team at Dow Jones Market Data.
To say that it has been a remarkable run-up is, perhaps, an understatement for some assets. Carvana CVNA, -2.38%,
a left-for-dead used-car retailer, whose stock had surged by 1,100% at its peak so far this year, before retreating somewhat, is a perfect example of the fervor surrounding risky assets.
It feels as if buyers are crazed, even as the Federal Reserve is set next week to raise interest rates a quarter of a percentage point, marking the 11th time (since March of 2022) that the central bank has increased benchmark interest rates after pausing in June to assess the inflation backdrop.
The Wall Street Journal this week described the investing environment as hitting a “fever pitch” with “risk-on” assets the most popular they have been since late 2021—right before stocks entered the longest bear market in decades.”
The surprising velocity at which the bearish miasma from earlier this year has dissipated is also noteworthy, considering the concerns around stubbornly high inflation and incessant fear of a Fed-induced recession.
At Friday’s close of trade, the Dow was off a mere 4.3% from its January record high reached in 2022, the S&P 500 is about 5.4% shy of its Jan. 2, 2022 closing high. Soberingly, the tech-weighted Nasdaq Composite Index COMP, -0.22%
remains off nearly 13%.
Now, however, may be time to take profits, some pros seem to caution.
Stifel’s chief equity strategist Barry Bannister told MarketWatch via email that the lagged effects of the Fed’s barrage of tightening, combined with stingy lending — among other factors — would likely be triggers for a market pullback, if not an economic retrenchment.
“In total, those leading indicators will keep economic growth soft,” Bannister said, also referencing flagging manufacturing.
In large part, that is why he’s calling for sideways action or a possible retreat of about 3% for the S&P 500 SPX, +0.03%
to 4,400.
Bannister’s recent call is worth heeding because he nailed the first part of a two-pronged prediction for 2023, when he referred to it as a year of two halves.
2023 may be a year of 2 halves, with the S&P 500 peaking mid-2023. The S&P 500 in late 2023 may give back some or all of 2023 gains.
The Stifel analyst sees a heightened recession risk for 2024.
Meanwhile, Michael Gayed, who also runs the Lead-Lag Report and is a portfolio manager at Tidal Financial Group, warned of the perils of investors’ rabid buying, in a recent report. Similar to Bannister, he also predicted a strong first half of 2023 followed by a retreat in latter part of the year.
Jacques Cesar, a former managing partner at Oliver Wyman who now works on market valuation for the firm, shared a similar sentiment to those two…but with some nuances, in an interview with MarketWatch.
“Right now, we are in a melt-up,” he said. “And Rule No. 1 about a melt-up, don’t short a melt-up,” he said, referring to making bearish bets that the market will fall soon.
“Is the market too high? Yes,” Cesar said. “But is there a signal to short? Absolutely not,” he said.
The market valuation pro, says investors find themselves in a Russian nesting doll of market conditions: “We are in a sub-cyclical bull in a cyclical bear in a suprasecular bull.”
His assumption is that the current melt-up in markets will reverse but cautions that predicting the precise timing is impossible.
Useful signs to look for will be decelerating market pricing and then reversing coupled with trading volume picking up as stocks slide.
Cesar also predicts a pullback in 2024, if not a recession, and said that downturn will be followed by a return to a suprasecular, long-term bull run in 2025.
As for inflation, Cesar says it has been dropping like a stone and pointed to the New York Fed’s Underlying Inflation Gauge as an early (but perhaps unheeded) signal that pricing pressures have been steadily receding.
So much so that disinflation, a slowdown in the rate of inflation, may be a corporate concern in coming quarters.
He said companies, which enjoyed healthy pricing power during the inflationary period, will be hurt in the short-term by disinflation in the short term.
“As you go into disinflation, the margins get squeezed,” he said.
Bannister says oversold parts of the market like banks KRE, -1.26%
KBE, -1.20%,
industrials XLI, -0.47%
and basic materials XLB, +0.01%,
might be better opportunities for investors in the third quarter than growth-oriented tech plays like Tesla TSLA, -1.10%,
for example.
In the end, bulls (and bears), similar to moviegoers are wading back into a market that had been written off at the start of the year. The major cinematic question? Will they will be partying with Barbie or getting blown up with Oppenheimer?
The U.S. government will no longer be able to meet all its obligations in full and on time sometime between early June and early August if Congress doesn’t raise the federal borrowing limit, according to a new projection released Tuesday by the Bipartisan Policy Center.
The think tank’s estimate falls in line with a projection that Treasury Secretary Janet Yellen made last week, as she said her department’s best estimate is that it could be unable to continue to satisfy all obligations “by early June, and potentially as early…
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Democrats largely have closed ranks behind President Joe Biden ahead of next year’s election, but he isn’t completely without challengers for the party’s nomination.
Author and activist Marianne Williamson has thrown her hat in the ring, pursuing a longshot bid that comes after her 2020 presidential campaign fizzled out before the Iowa caucuses.
Why isn’t she falling in line and supporting her party’s incumbent president? What’s her pitch to people who think she’s not a serious candidate? What are her top economic proposals?
Williamson, 70, tackled those questions and more in a phone interview earlier this week.
Our Q&A with the Democratic presidential hopeful has been edited for clarity and length.
MarketWatch: In a nutshell, could you explain why you’re running for president?
Williamson: I’m running for president because I believe that some things need to be said and some changes need to be made, in order to repair some serious damage that’s been done to our democracy, to our country, to our people and to our environment over the last 50 years.
MarketWatch: You’ve talked about running to address “systemic economic injustices endured by millions of Americans” because of the “undue influence of corporate money on our political system.” What do you see as the top examples of that?
Williamson: During the 1970s, the average American worker had decent benefits, could afford a home, could afford a yearly vacation, could afford a car and could afford to send their child to college. In the last 48 years, there has been a $50 trillion transfer of wealth from the bottom 90% to the top 1% of Americans. That transfer has decimated our middle class. We are now at a point where if you are among 20% of Americans, then the economy’s doing pretty well for you. But, unfortunately, that 20% is surrounded by a vast sea of economic despair. We have 60,000 people in the United States who die every year because they can’t afford healthcare XLV, -1.11%,
one in four Americans living with a medical debt, and 18 million Americans unable to fill the prescriptions that their doctors give to them.
If you are in the club in America, if you are making it in America — and I have sold some books, so I understand the high side of the free market and have benefited, and I’m grateful for that — but no conscious persons wants to feel that they create wealth at the expense of other people having a chance. That is not American. It’s not what the American Dream is supposed to be.
I’m not trying to whitewash and romanticize American capitalism before this era. I’m not saying we were ever perfect, but it does seem to me that when I was growing up, the social consensus is that we were supposed to try. We knew that the higher good was that there would be this balance between individual liberty, including economic liberty, and a concern for the common good. But today concern for the common good has become almost derided as some quaint notion, and that we shouldn’t really give much more than lip service to it. And that’s a lot of human suffering that occurs because of that change in the social contract.
MarketWatch: Here’s kind of a two-part question. What would be your top economic priorities, and how in particular would you address high inflation and the recent banking KBE, -1.65% crisis?
Williamson: I’d like to see universal healthcare. I want to see tuition-free college at state colleges and universities, which is what we had in this country until the 1960s. There should be free childcare. There should be paid family leave. There should be guaranteed sick pay and a livable wage. And I think Americans are waking up to the fact that those things that I just mentioned are considered moderate issues in every other advanced democracy. They should not be considered left-wing fringe issues. They are granted to the citizens of every other advanced democracy.
That was your first question. The second has to do with high inflation. A lot of that high inflation has to do with price gouging by huge corporations, whether it has to do with food companies, transportation companies and so forth. All of those CEOs should testify before Congress and talk about the ways that they have — for the sake of their own profits — gouged the American people, particularly at such a time as this. And this is what happens when we normalize such a lack of conscience and such a lack of ethics within our system.
In terms of what happened with the bank in Silicon Valley SIVBQ, -3.39%,
which is what your third question was, right? I think the depositors should be made whole, but the bank executives who were taking multimillion-dollar bonuses for themselves, both before and right after the crash, they certainly should not get those bonuses. And also it’s concerning that some of the tech investors that would benefit the most from those deposits were the ones who caused the run on the bank. I don’t think that they should receive the benefit of what happens when those deposits are made whole. But the average depositor absolutely should be made whole in such cases.
MarketWatch: You mentioned free tuition and child care. Where would the funding for that come from?
Williamson: The funding should come, first of all, from taxation. The 2017 tax cut in this country was a $2 trillion tax cut, and 83 cents of every dollar went to the highest-earning corporations and individuals. Now that tax cut also included the middle-class tax cut, and the middle-class tax cut was good.
That tax cut for the highest earners should be repealed, but the middle-class tax cut should be put back in immediately.
Secondly, we should stop all the corporate subsidies. Why are we giving subsidies to these companies that are already making multibillions of dollars in profit and often then price gouging the American people?
Third, I believe there should be a wealth tax. If somebody has $50 million, I don’t have any problem with their paying an extra 2% tax. And if they have $1 billion, let them pay another 1%. Somebody with a $50 million portfolio, much less $1 billion in assets, would not even feel that change, but the changes in people’s lives that would be created by those shifts would be huge.
MarketWatch: Your campaign often gets described as a real longshot bid. Why are you running when so many people say you have a low chance for success?
Williamson: Well, certainly Donald Trump was considered a longshot. For that matter, when he began Barack Obama was considered a longshot. Surely we remember when Hillary Clinton was considered a shoo-in.
MarketWatch: A recent Monmouth University poll of Democratic voters found 11% had a favorable view of you, 16% had an unfavorable view, 21% had no opinion, and 52% had not heard of you. How do you win over those voters who have an unfavorable view, and how do you reach the folks who haven’t heard of you?
Williamson: Well, there was a poll that came out last week that put me at 10%, including 18% with independents and 21% with people under 30.
It’s very difficult for someone like myself to get the message out when you have such institutional resistance to my even being in the conversation, and that is displayed in various ways. But there is independent media today. God knows there’s TikTok, where my information seems to be doing quite well.
This early, no candidate should be allowing the polls to determine their path forward. I didn’t go into this expecting the approval of institutional forces. And I, as a matter of fact, expected the kind of resistance that I’ve received, but that doesn’t matter. What matters is that a certain agenda be placed before the American people, and I am providing that option — the option of that alternative agenda.
I believe that agenda is the way for the Democrats to win in 2024. But even more importantly, I think it’s the agenda that will lead to the repair of this country.
MarketWatch: You mentioned TikTok, and that has been a hot topic in Washington, D.C., in recent weeks. Do you have a view on the Democratic and Republican proposals to ban TikTok in the U.S.?
Williamson: I think the United States government does need to be concerned with tech XLK, -1.00%
surveillance, but I wish they were as concerned when it comes to American-run companies as when it comes to Chinese. It’s a serious issue, it’s a valid issue — the whole issue of surveillance. But it’s a gnarly issue as well, and rushing to shut something down, which is so obviously a platform depended on by millions and millions of Americans for information sharing, is never something that should be done lightly.
MarketWatch: Some Americans may know you only for your spiritual work, and these folks may not think you’re a serious presidential candidate. The White House press secretary indicated she’s in that camp. What’s your message to win those folks over?
Williamson: First of all, I don’t think of my campaign as quote-unquote trying to win anyone over. There’s something that I read years ago that has always guided my work: “If there’s something you genuinely need to say, there’s someone out there who genuinely needs to hear it.” I am speaking to people who I know agree with me. I wouldn’t be doing this if I weren’t aware that millions of people agree with me.
I think it’s very sad that the president would allow a presidential press podium to be used to mock a political opponent, and I think that many people were and are offended by that. This is a democracy. We should have as many voices out there as possible. We should have as many people running in an election as feel moved. Nobody has a monopoly on good ideas. There are ideas on the left and ideas on the right. There are ideas all across the spectrum, and this is a point in American history where we as Americans should hear them all.
MarketWatch: What do you think are some of the main things that President Biden has gotten right, and in what areas has he gone wrong?
Williamson: Well, the first thing he did right was he defeated Donald Trump. The president has taken an incremental approach to America’s problems, and I believe that he does wish to alleviate the suffering of many people whose lives are affected by some deeply unjust systems. But I don’t think that the alleviation of stress is enough right now. We need fundamental economic reform.
We also need a serious answer to climate change, and the president’s approval of the Willow project is not that. The president has said that he recognizes that climate change is an existential crisis, and yet he has given more oil CL00, +0.34%
permits than even Donald Trump did, and he has approved the Willow project.
The Democratic House and Senate — they did cut child poverty in half with the child tax credit, but then, when that expired six months later, they didn’t bother to permanentize it.
These are the kinds of half-measures and incremental measures which are not enough to change the fundamental economic patterns in this country that lead to so much chronic economic anxiety and despair.
Joe Biden is shown in conversation in August 2019 with Marianne Williamson during an event for Democratic presidential candidates in Clear Lake, Iowa.
AFP via Getty Images
MarketWatch: One thing that comes up often with President Biden is his age, which is 80, while you’re 70. Do you think his age should be a concern, or is it ageism to bring it up?
Williamson: I think the individual has to consider this themselves. I have a problem, of course, contributing to the conversation because of the issue of ageism. But on the other hand, everybody can see for themselves what they can see for themselves.
I can only say if I were 80, I wouldn’t be running. But you know, I will not take potshots at the president, and I think that veers into potshots.
MarketWatch: Let’s talk about taking on Donald Trump, Ron DeSantis or whomever the Republican nominee ends up being. Why do you think you’re the Democrat who could end up beating one of them?
Williamson: Republicans are going to throw some big lies at the Democrats in 2024, and the only way that we’re going to defeat them, in my opinion, is to tell some big truths. Franklin Roosevelt said we would not have to worry about a fascist takeover in this country as long as democracy delivered on its promises. Democracy has not delivered on its promises. The only way to beat Donald Trump or Ron DeSantis in 2024 is to propose an agenda in which democracy once again delivers on its promises to the majority of the American people. And that would mean the issues I mentioned before: universal healthcare, tuition-free college, free child care, a guaranteed livable wage and paid family leave. Those are given to the citizens in every other advanced democracy, and there is no good reason whatsoever why they are not delivered to the average citizen in the United States.
MarketWatch: There are Democrats who could be challenging President Biden for the party’s 2024 nomination, but they aren’t and instead they’re supporting him. Why aren’t there more efforts in the party to get people to run for president?
Williamson: Well, you’d have to ask them why they’re not running. But there’s clearly a trope that the field should clear, and everybody should simply get in line with the opinion of the Democratic establishment that Biden is the man because they have decided so. I don’t see it that way. I believe the Democratic primary voters — and independent voters and anyone else, if it’s an open primary — they should decide who the Democratic candidate is. To me, that’s what democracy is. That’s what elections are about.
MarketWatch: The Democratic Party is not expected to hold presidential primary debates for 2024. What can you do to change that and get some time on a debate stage?
Williamson: Well, I hope to have a successful campaign. I hope to have high poll numbers. I hope to have a lot of people in those primary states yelling foul. It’s a government of the people, by the people, for the people. The American people should hear what their options are, and that’s what a debate would be. If enough people realize that and believe it and make laws about it, then that is what will happen.
I think sometimes there’s a kind of learned powerlessness on the part of the American people today. We forget the radicalism of the American experiment, which is that the governance of this country is supposed to be in our hands. But the American people have been trained to expect too little and almost trained to give up the power of independent thought. I hope that my campaign and other things that occur in this campaign season will awaken people, and I think a certain kind of awakening is happening already.
MarketWatch: We’re a financially focused publication, so here’s a question along those lines. I looked at your financial disclosure from your 2020 presidential run. It showed some investments in big public companies like Apple AAPL, -0.58%
and Mastercard MA, +0.27%
…
Williamson: Wait, what are you talking about?
MarketWatch: That’s from your 2019 executive-branch personnel public financial disclosure report. It shows investments in various stocks and funds. The question — for our readers who are investors or people saving for retirement — is could you describe your own approach to investing and preparing for retirement?
Williamson: Socially responsible investing, and that’s why I said, “Whoa, what?” Because I believe in investing in socially responsible companies.
MarketWatch: One last question: What else would you like people to know?
Williamson: America has some serious problems, but we have infinite potential to solve those problems. We need to revisit our first principles, as John Adams said, and find that place in our hearts where, as Americans, as adults in this generation, we recognize that this profound idea of American democracy is put in our hands for safekeeping. And that doesn’t just give us rights; it gives us responsibilities. The political system in the United States speaks to us too often like we’re children, like we’re seventh-graders. Our public dialogue is too often on this kind of seventh-grade level. This is not a time to be an immature thinker, and it’s not a time to get into mean-spiritedness or cynicism either. If we allow ourselves to rise to the occasion, no matter what our politics are, we’re going to repair what has been broken, and we are going to initiate a new beginning. I think that’s possible. Other generations have done it, and we can do it, too.
MarketWatch: Thank you for being available to chat.
U.S. stocks extended losses in the final hour of trade on Thursday, while awaiting Friday’s February employment data that could help decide how large an interest rate hike the Federal Reserve will impose at its next meeting in two weeks.
Financial sector stocks were particularly hard hit along with cryptocurrencies after Silvergate Capital Corp., collapsed overnight amid growing scrutiny in Washington. Other financial stocks fell, dragged down by SVB Financial Group, which fell by a record amount.
How are stocks trading
The S&P 500 SPX, -1.85%
dropped 56 points, or 1.4%, to 3,936
Dow Jones Industrial Average DJIA, -1.66%
was off 412 points, or 1.3%, to 32,387
Nasdaq Composite COMP, -2.05%
declined by 174 points, or 1.5%, to 11,399
Both the S&P 500 and Nasdaq finished higher on Wednesday, with only the Dow finishing in the red, while all three indexes remained on track for weekly losses. A weekly drop for the S&P 500 would mark its fourth such pullback in five weeks.
What’s driving markets
U.S. stocks trimmed earlier gains and extended losses on Thursday afternoon after trading modestly higher after the open when the latest weekly jobless claims data showed an unexpectedly large uptick in the number of Americans filing for unemployment benefits.
Economists said the data suggest that the labor market might be starting to slow, which is seen as a necessary prerequisite for driving inflation back to the Fed’s 2% target.
“The labor market might just be on the cusp of an inflection point,” said Peter Boockvar, chief investment officer of Bleakley Financial Group, in emailed commentary.
Investors are now looking ahead to Friday’s closely watched February jobs report from the Department of Labor. Economists polled by the Wall Street Journal expect 225,000 jobs were created last month after 517,000 new jobs were created in January, a number that was much higher than economists had anticipated.
“If we do get the expected 200,000, or really anything between say 180,000 and 240,000, this would be a return to the prior trend and would signal that last month was indeed a one-off,” said Brad McMillan, chief investment officer of Commonwealth Financial Network, in emailed comments.
“That would be perceived as a positive by the Fed and markets, suggesting that inflation may start moderating again but is still high enough to allow for continued economic growth.”
The Russell 2000 RUT, -2.75%,
the small-cap index, is on pace to close below its 50-day moving average for the first time since January 9, 2023, according to Dow Jones Market Data.
Regional bank stocks underperformed on Thursday. Shares of Silicon Valley Bank parent company SVB Financial Group SIVB, -60.41%
plummeted more than 61% after the company disclosed large losses from securities sales and a stock offering meant to provide a boost to its balance sheet. SVB is on pace to book the biggest one-day selloff since the dotcom boom, while its trading was halted for volatility multiple times, according to Dow Jones Market Data.
The KBW Bank Index BKX, -7.70%
of 24 leading banks slumped 7.1%, on pace for its worst day since June 26, 2020, according to Dow Jones Market Data. SPDR S&P Bank ETF KBE, -7.30%
was down 6.5%.
Treasury yields fell with the yield on the 2-year note BX:TMUBMUSD02Yslipped to 4.885% from 5.064% on Wednesday.
Stocks suffered earlier in the week after Powell said during testimony on Capitol Hill that rates would likely need to rise even further than market participants had expected. However, the main indexes saw some relief after the Fed chief clarified that policymakers hadn’t yet decided on the size of the next rate hike.
Investors have already digested several reports on the labor market this week, including a report on the number of job openings, which showed that the number of Americans quitting their jobs had fallen below 4 million in January for the first time in 19 months.
“The big picture is that the labor market is easing, but it’s still tighter than it was before the pandemic,” said Sonu Varghese, a global macro strategist at Carson Group.
Uber Technologies Inc. UBER, -4.94%
shares dropped 4.4% on Thursday after Bloomberg reported on Wednesday that the ride-hailing food and package delivery company was considering a spinoff of its struggling Uber Freight business.
General Motors Co. GM, -4.88% slipped 4.1% after the automaker announced a voluntary buyout program that’s expected to lead to an employee separation charge of $1.5 billion.
Speaker Nancy Pelosi on Thursday said she will no longer serve as the top Democrat in the U.S. House of Representatives, with her departure coming after her party lost its majority in the chamber in this month’s midterm elections.
“With great confidence in our caucus, I will not seek re-election to Democratic leadership in the next Congress,” Pelosi said during a speech on the House floor.
“For me, the hour’s come for a new generation to lead the Democratic caucus that I so deeply respect, and I’m grateful that so many are ready and willing to shoulder this awesome responsibility.”
She said she will continue to represent her district in the House.
Some Democratic lawmakers have long called for new leadership in the House, wanting the California Democrat and her deputies to make way for the next generation. Pelosi, 82, has led the chamber’s Democrats in both the majority and minority for about two decades — since January 2003.
The No. 2 House Democrat, Majority Leader Steny Hoyer of Maryland, who is 83, announced Thursday that he also will not seek a leadership position next year.
New York Democratic Rep. Hakeem Jeffries, 52, is seen as a frontrunner to become House minority leader.
Pelosi is the country’s first female speaker and has been in Congress for about 35 years. She had made a deal with House members to serve for two more terms as leader — or four years — after Democrats scored a majority in that chamber of Congress in the 2018 midterms.
While Republican hopes for a strong red wave on Election Day — which was Nov. 8 — have been dashed, the Associated Press projected Wednesday that the GOP had won enough House seats to control that chamber of Congress.
The GOP’s slim majority is expected to cause trouble for the party’s leaders in the House. Meanwhile, the battle for control of the U.S. Senate went to the Democrats late Saturday.
The major laws passed during Pelosi’s time as speaker have included 2010’s Affordable Care Act, also known as Obamacare and which overhauled the U.S. healthcare XLV, +0.12%
system; 2010’s Dodd–Frank Wall Street Reform and Consumer Protection Act that targeted banks KBE, -1.09%
; and 2021’s Infrastructure PAVE, -0.92%
Investment and Jobs Act.
DJIA, +0.09%
lost ground Thursday as a key Federal Reserve official suggested interest rates may need to rise much further in order to subdue inflation.
