Stock market rebound: Is it a brief bounce or a signal the drop on Wall Street is over?
Stock market rebound: Is it a brief bounce or a signal the drop on Wall Street is over?
Bear Market is a term that sends fear into Wall Street and investors. What does it mean? And how does it affect both Wall Street and Main Street? Adam Shell explains.
After weeks of carnage that marked the worst fourth-quarter start for stocks in 10 years, the market mounted a rebound Monday, raising a key question: Is the rally just a short-term bounce or does it signal the end of a sharp drop on Wall Street?
The long-awaited rebound comes after sellers sliced nearly 2,000 points off the Dow Jones industrial average over the prior 10 days. But professional investors – still skittish after the recent rout pushed the broad market down more than 10 percent and into official "correction" territory – aren't ready to raise the all-clear flag just yet.
The mood among investors remains cautious despite a 300-point advance Monday for the blue-chip Dow average.
Skepticism shouldn't be too surprising, given that eight of the Dow's 15 biggest point gains in history have come in bear markets, or market stretches where the broad market was down more than 20 percent from their highs.
"Bounce or bottom?" is how Sam Stovall, chief investment strategist at New York-based Wall Street research firm CFRA, sums up investors' trepidation about the future direction of stock prices.
That question is fueling a lively debate. Market skeptics, citing severe damage to popular and once-high flying tech stocks, the fallout from the trade fight between the U.S. and China, and the drag on growth and corporate profits due to the Federal Reserve's interest rate hikes, warn that the rebound might not last.
More Money: GM poised to close plants in Michigan, Ohio, Maryland, will cut 15% of salaried workers
More Money: How to turn your dream of retiring at 65, and exiting the rat race, into a reality
More: Elon Musk says there's a '70 percent' chance he will make the trip to Mars
"The bar remains high for a durable move," says Chris Verrone, head of the technical analysis team at Strategas Research Partners.
Last week, roughly 45 percent of the stocks in the Standard & Poor's 500 were in a bear market, according to Bloomberg data. And after drops of that magnitude, sizable rebounds are often met with selling by investors looking to limit their losses, get back to even or lock in any profits they may still have.
This type of selling pressure acts like a ceiling on prices. That's why Verrone warns that the S&P 500, for example, which climbed to around 2,670 early Monday after sinking to 2,633 last week, could find it tough to climb back above a range of 2,750 or 2,800.
Reasons for hope
The market has been beaten up so badly that valuations have fallen to a low enough level to potentially lure buyers back in, an analysis by CFRA's Stovall found. The S&P's price-to-earnings ratio, or PE, for the coming 12 months has fallen from 19.3 in late January to 15.6 now. The current PE is close to the 15.3 multiple that marked the bottom of the past five corrections in the current bull market.
So if the market fell back to that recent average valuation, it would amount to a drop of about 1.5 percent from Friday's close, Stovall's data show.
Some investors also say that stocks could also get a lift if Federal Reserve chairman Jay Powell backs off his aggressive interest rate increase stance.
Markets also would likely move higher if President Donald Trump's summit with China's President Xi Jinping on trade at the G20 meeting this weekend indicates any thaw in the contentious standstill on tariffs, market pros say.
"All eyes with be on the G20 meeting for any signs of a possible resolution with the trade fracas with China," John Stoltzfus, chief investment strategist at Oppenheimer, told clients in a report.
Read or Share this story: https://www.usatoday.com/story/money/2018/11/26/stock-market-dow-rebound/2113524002/
SOURCE LINK BEST ONLINE NEWS WEBSITE https://www.beviral.online
Comentarios
Publicar un comentario