Corporate Bankruptcies And Defaults Are On The Rise

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In his Daily Market Notes report to investors, Louis Navellier wrote: 

Stocks Grind Higher

Stocks grind modestly higher, holding on to June gains.

The QQQ is leading the rise this morning as investor flows default to what has been working. Stocks were in the red pre-market and when QQQ jumped on the open the rest fell in line. The yield curve continues to steepen with the 2yr-10yr is now above 100bps as the 2yr stays elevated on Fed fears.

At a conference today Larry Fink, BlackRock’s CEO, said he saw 2 to 4 more rate hikes but no recession. There seems to be a growing expectation that consumer spending will slow in the second half of the year, that there will be top line challenges, and that earnings growth will be increasingly reliant on the successful implementation of AI to offset the tight labor market.

On the international front, things got colorful in Russia as there appeared to be a mutiny going on with Putin’s leader of mercenaries but which apparently got solved quickly, though the facts remain elusive.

China stocks continue to swoon since the Secretary of State Blinken visited Beijing a week ago and stated, “We do not support Taiwan independence,” increasing concerns about how bad things could get if and when China moves to take control there.

Bankruptcies And Defaults

Today crude oil remains below $70, and gold below $1,935. Another area of concern is corporate bankruptcies and defaults, with 41 defaults in the US YTD, double last year at this time. Bankruptcies have hit 324 not far behind the 374 total for ’22, the highest run rate since 2010.

Moody’s is looking for an annual default rate of 4.6% in ’23, above the long-term average of 4.1%, and seeing it rising to 5% by the end of 1Q24 and then easing. This is primarily the result of a higher cost of financing, as it is spread across many industries, and will grow sharper if consumer spending slows and the Fed keeps raising rates.

Treading Water

It appears likely that the market will continue to tread water and wait for further insight from the 2Q23 earnings season. Between now and then the inflation data will be a big focus in an attempt to predict how far the Fed might be willing to go.  

Coffee Beans: Party Pooper

More than three years after the emergence of Covid-19, most Americans have returned to their pre-pandemic lifestyles. However, when it comes to larger gatherings, such as concerts or sporting events, doubts still linger in the back of many people’s minds, with just 60 percent of U.S. adults saying they were comfortable doing either of the two in May 2023. Source: Statista. See the full story here