In his Daily Market Notes report to investors, Louis Navellier wrote:
Rally Pause
Market rally paused due to weaker oil prices, China rate cut, and a surprisingly weak NY Manufacturing Index.
Q2 2022 hedge fund letters, conferences and more
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After 4 consecutive weeks of major gains, stocks are making a minor dip this morning. Weighing on recession fears this morning are sharply lower oil prices, down 4.6% to $88/bbl, slowing numbers in China with retail sales for July and industrial production up less than forecasted, and the NY Empire State Manufacturing Index posting the weakest results (-31.3), since the early days of the pandemic.
Bond yields are falling on these economic indicators, with the US 10-year down 7bps to 2.77% and the 2-year down 6bps to 3.19%, with the yield curve inversion now 42bps.
The China rate cuts leave them moving in the opposite direction of the rest of the world's central banks and is in response in large part to their weak property markets with new sales down 29% y-o-y and investment down 12%. They also posted 20% youth employment.
As the world's largest importer of oil, with oil consumption already down 8% for the year, this weakness is helping push oil down prices this morning. At the same time, lower energy prices, as well as lower prices for industrial metals, is positive for lower inflation trends.
Still A Buy-the-Dip Market
Stocks still appear poised to grind higher with now 90% of the S&P 500 above their 50-day average, decelerating inflation, and continued earnings growth.
Today is more about digesting the big gains of the last four weeks where we have seen the S&P P/E rise from 16X and the bottom to 18X.
The primary risk in the near term will be if we see earnings forecasts cut, which we will have a preview of as several major retailers report this week and give us more insight into consumer trends.
For now, it is still a buy-the-dip market.
Coffee Beans
According to a survey, Americans said they would most likely cut back on contracts and subscriptions to counter inflation pressure. Shopping for clothes and going out to eat or drink could also get the ax, slightly more likely than traveling and vacationing. Thirty-five percent of Americans said they would try to save on food. Source: Statista. See the full story here.
