Falling on Wall Street – Bank of America strategist recommends selling US stocks

Falling on Wall Street – Bank of America strategist recommends selling US stocks

US stock markets opened slightly higher on Friday, but the mood quickly soured, especially after Republicans declared they needed a break in debt ceiling negotiations. This means that the chances of a solution over the weekend are slim.

This is how the top indices ended up before investors took the weekend off:

  • The S&P 500 index closed down 0.15 percent.
  • The Dow Jones Industrial Average closed down 0.33 percent.
  • The Nasdaq Composite Index fell 0.24 percent.

In corporate news, shares of investment bank Morgan Stanley fell 2.65 percent after CEO James Gorman announced plans to step down next year. Shoe chain Footlocker collapsed 27.25 percent after disappointing quarterly numbers and a negative outlook going forward. Shares of Deere, which makes agricultural machinery, fell 1.88 percent despite the company announcing an improvement and increased sales in the future.

Best since March

Despite the decline on Friday, this means that both the S&P 500 and the Nasdaq had their best week since March of this year, with total gains of 1.65 and 3.04 percent, respectively.

The most significant rise came on Wednesday and Thursday, after US President Joe Biden said he was confident the US would not default, while House Speaker Kevin McCarthy said there was “a structure to find a way to reach an agreement.”

As long as a solution is worked out before or thereabouts on June 1, what Christian Lee N. Forme calls a “total disaster” is avoided – defaulting on what is considered the world’s most risk-free investment, US government debt.

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The deal maybe as soon as next week

And McCarthy hinted, Thursday, that the two parties may have reached an agreement on a solution to the debt ceiling as soon as next week, according to CNBC.

From Japan on Friday morning, Biden also reiterated that he is confident Congress will ensure that default is avoided.

Otherwise, the trading day offers a few macro numbers, and there are also no quarterly numbers from the big companies, but Fed Chair Jerome Powell will take part in a panel discussion later on Friday that will also be attended by former US central bank governor Ben Bernanke.

The highest level in German history

The good mood on Wall Street comes after stock markets both in Europe and here at home rose significantly on Friday. At the opening of the stock exchange in the United States, Oslo Poor’s was expected to rise by about 0.9 percent, after the price of oil rose by 1.6 percent since midnight.

In Germany, meanwhile, the leading DAX looks set to close at an all-time high, as did France’s CAC 40 and Britain’s FTSE 100 earlier this year.

The DAX rose by about 0.7 percent, thus sniffing the levels last seen at the end of January last year.

bloomberg He points to quarterly numbers that have come in steadily better than feared, lower energy prices and the attraction of a Chinese economy that is increasingly opening up shop after nearly three years of lockdown due to Corona.

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Rheinmetall AG, supplier of auto parts and defense equipment, Siemens Energy, Adidas and software company SAP are among the stock market pullers that have pulled the load on the German stock market.

Recommend selling US stocks

So far this year, the S&P 500, Dow Jones, and Nasdaq Composite are up 9.3, 1.3, and 21.4 percent, respectively. After a bad 2022, big tech companies in particular have done well in the stock market in 2023 — but Bank of America strategist Michael Hartnett sees it as a sign of a bubble about to inflate.

So Hartnett and his management recommend selling US stocks, write bloomberg.

He points to all the hype around AI as a sign that the sector is in a kind of “baby bubble,” and maintains that previous bubbles always started with “free money” and ended when interest rates rose.

Hartnett points to the lessons of the dot-com bubble in 1999, where the combination of a sharp rise in internet stocks and strong macroeconomic numbers prompted the Federal Reserve to tighten monetary policy — causing the bubble to burst nine months later.

Hartnett also warns that the Fed may not have finished raising interest rates yet, unlike what is priced into the market. He advocates that interest rates on US bonds could rise to more than 4 percent, if the Fed halts interest rate increases by some sort of mistake.

–And in that case, we certainly haven’t seen another Fed rate hike this time around, the Hartnett division wrote in a note on Friday.

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The interest rate on 10-year US government debt hovered around 3.6 percent on Friday, after rising significantly as the debt ceiling drama intensified.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For more terms see here.

Dalila Awolowo

Dalila Awolowo

"Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff."

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