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Wall Street Plunging After Dimon’s Desperately Breaking Wall Street Wall Street, The Dow and the S&P 500

So much for a sleepy Columbus Day on Wall Street. Stocks weren’t doing much Monday morning but took a turn lower in the afternoon following stark comments from JPMorgan Chase CEO Jamie Dimon, who warned that the United States is likely to enter a recession within the next six to nine months.

The stock of JPM was down 1% as it was one of the 30 stocks in the Dow. Several big banks are about to report earnings on Friday.

The Federal Reserve’s decision to hike the interest rate to fight rising prices spooked the markets and has led to a decline in the stock market. Stocks soared early last week, leading to hopes that the market had bottomed.

But sellers have returned with a vengeance in the past few days. The jobs report did little to allay fears about Fed rate hikes.

The worse than expected retail sales report sent the stock market plunging on Thursday. The Dow lost 765 points Thursday, or 2.3%, the index’s worst day in three months. The S&P 500 lost 2.5% and the Nasdaq tumbled 3.2%, their worst days in a month.

The Superconducting Thanksgiving Market: The U.S. Economy is Doomed to a Superfluid, and Consumers are Prepping for the Next Few Months

Monday’s bond market was closed, and the 10-year Treasury yield is currently around 3.89%. The 10-year yield reached its highest level in over 3 years late last month and is heavily influenced by mortgage rates.

The Feds rate hikes will eventually slow broader consumer spending. The housing market has already been adversely affected by the central bank’s aggressive tightening, as is another notable area of the economy.

The full effect of policy actions to date will be visible in the coming quarters because of lags in transmission. The rest of the economy could soon slow in some way.

It has been a tough year for American consumers. Inflation everywhere. Rapidly rising interest rates. A housing market that is starting to cool off. That begs a question with the holidays right around the corner: Are shoppers finally tapped out?

Investors, meanwhile, are gearing up for a week full of important economic data. Wednesday will bring the minutes from the Fed’s last meeting, and a second revision of GDP will come out on Thursday. On Friday January’s Personal Consumption Expenditures – the Fed’s preferred inflation gauge, will be released.

But the most recent Consumer Price Index figures for October provided some relief for shoppers…and Wall Street. The pace of year-over-year price increases slowed more than expected, sparking a massive stock market rally Thursday.

Several major retailers are also on tap to report their results for the latest quarter…and potentially give outlooks about sales for the next few months. Walmart

            (WMT), Target

            (TGT), TJ Maxx and Marshalls owner TJX

            (TJX), Macy’s

            (M), Kohl’s

            (KSS) and Gap

            (GPS) are all on the earnings calendar for this week.

Putting a consumer’s wallets to the test: An update on the SPDR S&P Retail ETF, Victoria’s Secret, Abercrombie & Fitch

The Fed’s relentless rate hikes over the past few months have pushed credit card rates to all-time highs. So it will be costlier than ever for many consumers looking to buy gifts this year with their Visas and Mastercards. Black Friday is less than two weeks away.

Consumer spending accounts for about 70% of America’s gross domestic product, the broadest measure of the US economy, so a slowdown could weigh on growth and even send the United States into a recession.

Retailers have the big question of whether they can keep raising prices. So far, consumers have (perhaps begrudgingly) continued to spend despite any sticker shock. It helps that wage growth has remained robust.

The SPDR S&P Retail ETF

            (XRT), a fund that has Victoria’s Secret, Abercrombie & Fitch

            (ANF) and Gap among its top holdings, is down more than 25% this year.

Still, some experts worry that retailers may continue to struggle in 2023. Consumers may eventually need to watch their wallets more closely as worries about an imminent economic downturn grow.

“What makes us cautious is earnings estimates, which in some cases are a little too high, in our view. With slowing growth, those numbers need to come down,” said Matt Quinlan, a portfolio manager at Franklin Templeton, on a recent webcast.

Quinlan added that “some parts of the…consumer discretionary [sector] would be ones where earnings estimates need to be brought down a little bit more.”

The Real House Value Puzzle: a New Report on Home Prices and Permitting Permittations in the September and October Outcomes

A report on housing starts and permits for October will be released at the end of this week. The figures for existing home sales will be the same. Economists surveyed by Reuters are forecasting that 4.4 million homes were sold last month. In September and October, there were more than 6 million homes.

The housing market may be in a better position than in the late 2000s, when a massive bubble was caused by mortgage lending. Home sales are taking a nosedive.

Home Depot

            (HD) reported record earnings for the fiscal year that ended in January, and boosted both its hourly wage for employees and the stock dividend for its investors. But the fourth quarter numbers painted a different picture, as the company missed revenue expectations for the first time since 2019, before the pandemic.

The weakness in the home sale market that is resulting from high mortgage rates is not taking a hit, according to the home improvement chain. The CFO said that the company could be benefiting from the current state of the housing market, because homeowners are more likely to fix up their current homes than move.

Inflation could be a problem as well. The Home Depot noted that the number of purchases customers made didn’t match what they did a year ago.

President Biden and the Chinese leader will meet at the G20, as will Japan GDP and earnings from Tyson Foods and Oatly.

Wednesday: US retail sales; Japan trade data; UK inflation; earnings from Target, Lowe’s, TJX, Cisco

            (CSCO), Nvidia

            (NVDA) and Bath & Body Works

The sell-off has been broad, only 12 companies in the S&P 500 are trading in the green. Real estate and energy sectors have been hit the hardest the hardest, down more than 3.3% and 2.1%, respectively.

The Dow Has Slidden, and Wall Street Can Change On A Dime: Wall Street Sentiment Can Change on a Dime After Moody’s Analytics

Now, economists at Moody’s Analytics predict America’s economy will grow at an annualized rate of just 1.9% in the fourth quarter, down from its previous estimate of 2.7%. The Moody’s analysts were spooked by weak manufacturing and retail reports and lowered their forecast for GDP in 2023 to 0.9%, which is much lower than their previous estimate.

Sentiment on Wall Street can change on a dime, and this week is clear evidence of that: The Dow has tumbled about 1,300 points since the Fed’s policy update at 2 p.m. ET Wednesday. It’s December, and not helping stocks. Many traders are on vacation, volume is low and tiny moves can get exacerbated.

Meta and Adobe are the largest gainers in the market today. Adobe shares soared after the company reported better-than-expected quarterly earnings and guidance. Meta, which is still down nearly 65% for the year, saw a tick after JPMorgan upgraded shares of the company to neutral from overweight.

Walmart and Home Depot warned that US consumer strength was in doubt after the fourth quarter earnings season concluded on Tuesday.

Recent economic data has been strong. But sticky inflation and, now, warnings from bellwether retail companies like Walmart and Home Depot have traders worried that the already hawkish Fed will keep rates higher for longer.

Walmart’s chief financial officer said during the earnings call that the consumer is very pressured and balance sheets are running thinner as savings rates decline. It is so because we are taking a cautious outlook on the rest of the year.

The Role of Fixed-Rate Mortgages in Real Estate Investment Decisions: A Commentary on McPhail’s “Incentives for Purchasers to Get a Higher Rate Mortgage”

McPhail said that over ninety percent of US homeowners own their homes with a fixed rate mortgage. There is not an incentive for buyers to move to a higher rate mortgage. And in fact, the incentive is really there to improve in place.”