With a growing number of major financial institutions and company CEOs dominating the news cycle, warning of a 2023 recession, the bears extended their attack Tuesday.  Though the selling raised some uncertainty for a Santa rally, critical support levels in the index charts held.  However, we will need the bulls to step up and defend now, or the bears could quickly create some technical damage that may be difficult to recover.  Earnings and economic reports could provide some inspiration, but recession worries, pending PPI and FOMC decisions, will likely keep uncertainty high for the near future.

While we slept, Asian markets sold off, with Hong Kong leading the way, down 3.22% as trade data disappointed.  European markets also trade in the red this morning as the bear market rally sentiment diminishes with worries of a looming recession.  U.S. futures reversed modest overnight bullishness to suggest a slightly bearish opening ahead of earnings and economic data.  Uncertainty is high so prepare for news driving price volatility to continue.

Economic Calendar

Earnings Calendar

We have more activity on the Wednesday earnings calendar, but unlikely market-moving reports.  Notable reports include AI, BF.B, CPB, GME, KFY, LOVE, OLLI, SPWH, THO, UNFI, & VRNT.

News & Technicals’

CEOs from JPMorgan, General Motors, Walmart, United, and Union Pacific are preparing for an economic slowdown.   Rising interest rates, inflation, and geopolitical concerns are among the issues cited.  The companies are taking a conservative approach to 2023.  Goldman Sachs and Morgan Stanley have cut workers ahead of a possible economic downturn, but Bank of America CEO Brian Moynihan and his CFO have said they don’t see the need for layoffs.  That doesn’t mean Bank of America’s headcount won’t shrink as it looks to cut expenses.  “We’re up to about 215,000 [employees]; we need to run that backdown,” he said Tuesday. 

Fink has become an outspoken proponent of “stakeholder capitalism” and, in his annual letter to CEOs earlier this year, pushed back against accusations that the giant asset manager was using its size to push a political agenda.  Bluebell — an activist fund with around $250 million in assets under management that holds a tiny stake in BlackRock — has previously targeted the likes of Richemont and Solvay and had a hand in successfully forcing management to restructure at Danone. 

With a growing number of banks and company CEOs warning about a 2023 recession, the bears found the inspiration to matain their attack on Tuesday.  However, on the good news side of the selling, it has substantially relieved the frothy overbought condition of the Dow and key support levels held at yesterday’s close.  The bad news is that recession worries continue to grow and wouldn’t take much to push the SPY, QQQ, and IWM below support to possibly spoil the hoped-for Santa rally.  Today we have a few more earnings reports, Mortgage Apps, Productivity and Costs, and Petroleum Status numbers to inspire the bulls and bears.  With a PPI number this Fraidy and an FOMC decision next week, understandably, making traders question the uber-bullish stance of late.  With the big financial institutions battening down the hatches and layoff projections rising, plan for a volatile end to 2022.

Trade Wisely,

Doug