Analysts say this is what the Black Friday massacre could mean for Monday’s stock market trading

The new, fast-spreading strain of coronavirus B.1.1.529 A different type of concern was declared by the World Health Organization Global markets were shaken on Black Friday, raising concerns about the performance of the economy and Wall Street next week, after selling off the November gains for the S&P 500
SPX,
-2.27%

And the Nasdaq
COMP,
-2.23%

The Dow Jones Industrial Average was sent
DJIA,
-2.53%

The biggest drop in a single day since October 28, 2020.

The WHO said the omicron variant, which was discovered in Belgium, Israel and Hong Kong and first identified in southern parts of Africa, is more transmissible than the delta strain currently prevalent worldwide and other variants.

The emergence of the new dynasty led to the White House Announcing restrictions, starting Monday, on travel for non-US citizens and residents of South Africa, as well as from Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi, and accession to the European Union, the United Kingdom, Singapore and Japan, which also announced Similar travel ban.

Market sell-offs during the abbreviated Black Friday session and a commensurate flight into assets that investors hope will do better amid new mobility restrictions helped overshadow the usual focus on retail, on a day tied to heavy consumer spending ahead of the Christmas holidays. Friday’s pullback also provided a clear reminder that the trajectory of the market and economy hinges on the trajectory of COVID.

What is unclear is whether the latest development of the coronavirus will permanently damage the skin of the market. Omicron comes at a fragile time for bullish investors, as bears point to high stock market valuations, inflation fears and global economic growth concerns as reasons to expect a pullback in stocks that have managed to avoid a drop from a peak of more than 5%.

In theory, the post-Thanksgiving Friday environment is traditionally light-traded and therefore more susceptible to massive price swings.

The Nasdaq saw its lowest volume this year on Black Friday, with 3.479 billion shares traded, well below the year-to-date average of 5.099 billion. Total composite volume, including trading on the Intercontinental Exchange
ice,
-1.96%

Platforms owned by the New York Stock Exchange were 8.760 billion, compared to a year-to-date average of 11.196 billion, according to market data from Dow Jones.

However, only time will tell if the reaction to the omicron is a textbook, an unusual sale, or something more sinister.

MarketWatch’s Bill Watts books, citing research Friday by Mark Arbeter of Arbeter Investments, that the next level of support to watch for the S&P 500 after To close at 4,594.62 on Friday is at 4570, the 50-day exponential average; 4566, retracement of 38.2% of the rally; and 4550, the previous highest level from early September.

“It is too early to know to what extent the new variable will affect economies and markets, and market moves may be exacerbated on Friday by lower liquidity due to the Thanksgiving holiday in the US, and the risk of more bad news emerging over the weekend,” wrote Jonas Goltermann, chief markets economist. In Capital Economics, in a research note on Friday.

JC Parets of the All Star Charts blog writes that things could get suspicious if the S&P 500 is pushed below 4500, with little support below that point.

“You know how parents always tell you that nothing good happens after midnight? Well in the S&P 500, nothing good happens at below 4500,” he wrote in a blog post on Friday.

All star charts

“If we were below that, there would likely be a much bigger problem, and larger cash positions in 18 months would be justified,” Barretts wrote.

Some analysts say there are legitimate public health reasons for concern.

“The fact that this variant appears to be spreading much faster than previous versions (including the delta variant) requires very careful monitoring,” Michael Strubek, chief global investment officer at Credit Suisse, wrote in a research note. There are some questions about the effectiveness of Pfizer’s current COVID vaccines
PFE,
+ 6.11%

and modern
mRNA,
+ 20.57%

Because of the number of mutations that the omicron variant carries on the spike protein. The spike protein is part of the virus that the COVID-19 vaccines target.

Jefferies analyst led by analyst Sean Darby noted that risk appetite was already declining ahead of Black Friday and the selling might have been a “turning point” in favor of caution and risk moderation.

News of the spread of new or not new COVID virus in South Africa
It appears to have been the turning point in changing risk appetite over the past 24 hours,” Jefferies analyst wrote.

“However, there has been a dramatic change in the risk variables over the past month – a
An increasing number of “Treasury Terminal Auctions”, the stock market breadth slump and
The almost imperceptible change in US retail appetite that seems to have gone unnoticed.
According to Darby and colleagues, the global equity designation is among the most aggressive in US history.

Jefferies research indicates that investors now expect that the Federal Reserve, under Jerome Powell, will accelerate the pace of reductions in central bank asset purchases, which will lead to a tightening of financial conditions that may be unfavorable for risky assets. Goldman Sachs sees the Fed regressing to $30 billion a month from a drop of $15 billion, and estimates three rate increases in 2022, up from two.

Ultimately, the Sharpe ratio – a measure of return per unit risk – is
Global stock shift. “We expect the gap between the performance of risky and safe-haven assets to narrow,” Jefferies wrote.

via Jeffreys

However, the situation may prove to be a buying opportunity for daring investors.

Strobeck writes that “risk assets like stocks are likely to return some strength, but we’ll see this as an opportunity in selective and specific areas.”

“At this point, we’re repeating our assessment from the last Investment Committee report, that is, keeping equities in small heavyweights in portfolios and government bonds when underweight,” Credit Suisse’s chief information officer wrote.

Analysts at Citigroup also said “we will buy any pullback,” noting that the bearish checklist does not indicate significant red flags. “Valuations look stretched, but other factors (credit margins, money flows) are not yet particularly stretched,” Citi wrote, with 7.5 out of 18 red flags showing in its metrics for global markets while the US sees 9.5 out of 18.

City Research

The weekend sale may have led to a Black Friday sale to stock market investors, says Greg Pasock, CEO of AXS Investments in Port Chester, New York.

“Black Friday is usually the unofficial start of the annual holiday shopping season. But we think the real shopping is for stocks that have been battered by rising Covid infections, inflation fears, and supply chain problems, but still have strong fundamentals that will drive their gains as the economy reopens.” in the end , “

However, some analysts point out that the ongoing lockdowns in Europe and the spread of COVID, even before the omicron’s announcement, were reasons to be cautious as it will affect the global growth outlook.

Either way, it looks like some degree of warning could be in place next week and could color trading through the remainder of 2021.

Monday’s trading will help determine if the uptrend continues or if a bearish phase is taking shape.

It will be a week focused on the employment situation, with the US jobs report for November due out at the end of the week, and Powell and others providing their final thoughts ahead of the media blackout that begins before the last meeting of the 2021 Federal Open Market Committee on December 14-15.

I see: Fed inflation concerns at the last meeting left room for maneuver to accelerate bond purchases

Santa Claus pool, anyone?

What is in the economic calendar?

Monday

Pending home sales report at 10 a.m. ET

Tuesday

  • S&P Case-Shiller Home Price Index for September at 9 a.m.

  • Chicago PMI for November 9:45 a.m.

  • Consumer confidence index for the month of November at 10 am

Wednesday

  • ADP Employment Report for November 8:15 a.m.

  • Final reading of IHS Markit PMI at 9:45 am

  • ISM Manufacturing Index for November at 10am

  • Construction spending for the month of October at 10 am

  • Beige book at 2 p.m

Thursday

Weekly Unemployment Claims Report for the Period Ending November 27 at 8:30 a.m.

Friday

  • November Nonfarm Payrolls Report at 8:30 a.m.

  • IHS Markit Unmanufactured November Reading 9:45am

  • ISM Services Report for November at 10am

  • October factory orders at 10 am

  • October core capital goods orders updated at 10am

Federal Reserve Speakers

Monday

  • Federal Reserve Chairman Jerome Powell Delivers opening remarks at 3:05 p.m. ET at the New York Center for Innovation Presentation event.

  • Federal Reserve Bank. Michel Bowman Talks at a Virtual Seminar on Indigenous Economies hosted by the Bank of Canada, Tolo Center for Indigenous Economics, and the Reserve Bank of New Zealand at 5:05 p.m.

Tuesday

  • Powell will testify before the US Senate Banking Committee at 10 a.m., along with the Secretary of the Treasury Janet YellenOn the state of the US economy amid the COVID pandemic as part of the Care Act.

  • Outgoing Fed Vice Chairman Richard Clarida He speaks at 1 p.m. at an event hosted by the Federal Reserve Bank of Cleveland.

Wednesday

Outgoing Federal Reserve Governor. Randall Quarles He will present parting ideas at the American Enterprise Institute at 11 am

.

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