Investors are trying to regroup after the worst month since the pandemic and Friday’s session that ended with the Dow sinking almost 1,000 points and the S&p 500 slipping back into correction territory.
All eyes are on this week’s monumental Fed meeting, where a 50 basis point rate hike is anticipated; some say the April crash means nothing bigger is in store.
Read: Why A Fragile Stock Market Faces The Danger Of Rising Real Yields As ‘TINA’ Trading Fades
Unicredit’s chief economic adviser, Erik F. Nielsen, told clients that despite a gloomy April, stocks are holding up better than he expected, but perhaps not for much longer: “The problem is that asset allocation is always the result of a game of odds, but as the odds change with a deteriorating world economy, cash and other zero-yield holdings may well become more attractive as a parking spot for a while.”
in our call of the day which comes from Bill Gurley, a general partner at Benchmark Capital and a venture capitalist who made an $11 million bet on Uber UBER
in 2011. Several of his more than half a million Twitter followers stood up after this. Twitter thread:
“An entire generation of technology entrepreneurs and investors build their full perspectives on valuations during the second half of an incredible 13-year bull run. The ‘unlearning’ process can be painful, surprising and unsettling for many. I anticipate denial,” Hurley tweets, adding three points to this:
Previous all-time highs are completely irrelevant. It’s not ‘cheap’ because it’s down 70%. Forget those prices that passed.
Valuation multiples are always a proxy for hacking. Dangerous to use. If you insist, 10X should be considered AMAZING and an upper limit. About that nonsense.
You may be surprised to learn that people want to value your company in FCF [free cashflow] and earnings. Facebook is trading at 14X GAAP and is growing 23%. What earnings multiples are you assuming?
Income and the QUALITY of earnings matter.
gurley linked to his 2011 blogwhere he explained that discounted cash flows “are the true drivers of the value of any financial asset, including companies”, and that price/income is a “dangerous technique because not all income is created equal”.
Among those who reacted to Gurley was Amazon AMZN
CEO Jeff Bezos, whose stock is facing its worst year since 2008, following the company’s first loss in seven years:
To some, Gurley’s comments were a warning of tough times ahead for the tech sector:
On the other hand, others say that large stock declines in the current inflationary environment are not abnormal:
Warren Buffett’s Berkshire Hathaway BRK
he bought $51.1 billion worth of shares in the first quarter in what he called a “casino” market. Chevron CLC
and Occidental Petroleum OXY
are on that list and also bought almost 10% of the video game manufacturer that will be bought by Microsoft, Activision Blizzard ATVI.
He and Vice Chairman Charlie Munger tried to reassure investors at the first in-person shareholder meeting since 2019 over the weekend.
More than 100 companies are yet to report this week, such as Pfizer PFE
and Modern MRNA
and Starbucks SBUX,
with Clorox CLX,
and MGM MGM
and Li Auto LI
Stocks have dipped after reporting sharp declines in April deliveries due to rising COVID cases in China. Recent data over the weekend showed factory activity in China hit a six-month low.
Elsewhere, experts are keeping an eye on new COVID subvariants emerging in South Africa.
The Institute for Supply Management index for April comes after the market open, along with construction spending, in a week that will give us not only a Fed meeting, but also employment data at the end of it.
Civilians at a conflict-ridden Mariupol steel plant in Ukraine began evacuating on Sunday. EU energy ministers are reportedly due to hold an emergency meeting on Monday to discuss Russia’s recent gas cuts for Poland and Bulgaria, as Germany has promised to phase out Russian oil by the end of the summer.
have opened slightly higher but choppy with bond yields BX:TMUBMUSD10Y
also rising after massive gains in April. Commodities mostly head the other way, with CL00 oil
and GC00 gold prices
lower. NG00 Natural Gas Futures
are increasing. The DXY dollar
continues to rise across the board, but not against the Russian ruble USDRUB.
Asian stocks traded lower, although most markets were closed for holidays. London was also on a break, but European stocks XX:SXXP
are lower, after suffering a Nordic-driven flash drop earlier in the day.
The latest weekly Commitment of Traders report from the US Commodity Futures Trading Commission showed hedge funds dumping corn, hogs, sugar and cocoa amid a general mood negative in the market. Peak Trading Research noted that the aggregate shorts in cocoa futures were the second largest on record, traditionally a buy signal.
Those futures have gained in 17 of 19 one-month periods after record short positions were added, Peak Trading said. Here is your graph:
These were the most searched tickers on MarketWatch at 6 a.m. ET:
An Italian soccer match has become the first to be viewed simultaneously in the Metaverse.
An animated series created by Meghan Markle for Netflix is gaining ground
Heading to the inaugural Miami Grand Prix? Be prepared to shell out over $1,000 for tickets.
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