The massive clearances suffered by Wall Street on the first two weeks of the year give hope a capitulation scenario that would allow fundamental market recover.
Slip clues, with a Standard & Poor’s Friday briefly fell to the lowest in more than a year, recalls the dark days of the Great Recession of 2008-2009.
However, most indicators show that the US economy is far from going into recession, according to many market participants. The market correction and adjustment of valuations will see attention on fundamentals, namely economic data and corporate earnings, after years of addiction to easy money and ultra-loose monetary policy the Federal Reserve, they say.
“I am paradoxically relieved by lower market that will allow us to return to fairer valuations and start from there, along a path marked by the rhythm of the economy and corporate earnings,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
“In my opinion, this means an end to the years under the influence of the Fed,” he added.
The slowdown in Chinese growth held responsible for many of the fall in stock markets and oil prices, the latter at their lowest for 12 years.
The Shanghai Composite Index closed Friday at its lowest level since December 2014, down over 20% from its highs of November.
“The effects of the slowdown in China are mainly concentrated on crude oil and there are reports that speculative commodity funds are facing margin calls increasingly higher as crude prices fall,” reports Gail Dudack, founder of Dudack Research Group in New York, in a note to clients Friday.
“How often in these cases unwinding margins, sales relate to the equity markets because the shares are the most liquid assets in portfolios. This explains that the movements (S & P-500) will be aligned with those of oil Gross recent weeks. ”
Friday’s session took capitulation paces with 944 New York Stock Exchange stock values have hit the lowest in a year. It was only the fourth time since the end of 2008 this number exceeds 900.
Also, Friday marked the seventh consecutive session that saw more than 500 values NYSE at their lowest level in a year, a series that had more produced since October 2008, following the bankruptcy of Lehman Brothers.
The major indexes on Wall Street fell Friday for the third consecutive week and the S & P closed at its lowest level since late August, the Nasdaq Composite is for its part its lowest point since October 2014.
Since 1 January, the Dow Jones lost 8.25%, the S & P 8.01% and the Nasdaq Composite 10.36%.
CHINESE STATISTICS TO MENU
Closed Monday for the Martin Luther King Day, US markets will reopen Tuesday on learning of new statistics from China: industrial production, retail sales and especially the fourth quarter growth, expected at 6.8% against 6 9% in the third quarter.
“Good numbers could alleviate concerns we may have,” said Brian Jacobsen, chief investment strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
Reassuring inflation numbers in the US and a return to manufacturing growth would also encourage investors to return to equities, he adds.
“That and more successful companies, of course.”
The consumer prices in December will be published on Wednesday and the Philadelphia Fed will release Thursday its index of industrial activity.
Among the main groups that publish their accounts include banks Morgan Stanley and Bank of America Tuesday, followed the day after Goldman Sachs. Technological, IBM will be followed Tuesday night while the results of Thursday Starbucks will provide guidance on consumer trends. General Electric will launch Friday the publications of major industrial groups.