{"id":42505,"date":"2023-07-31T07:14:15","date_gmt":"2023-07-31T11:14:15","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/for-the-stock-market-bad-news-is-back-to-being-good-heres-why-says-a-goldman-sachs-economist\/"},"modified":"2023-07-31T07:14:17","modified_gmt":"2023-07-31T11:14:17","slug":"for-the-stock-market-bad-news-is-back-to-being-good-heres-why-says-a-goldman-sachs-economist","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=42505","title":{"rendered":"For the stock market, bad news is back to being good. Here\u2019s why, says a Goldman Sachs economist"},"content":{"rendered":"
\n

It\u2019s arguably the last important week for the stock market this summer (with the possible exception of the Jackson Hole Fed gathering at the end of August) with payrolls data as well as Amazon and Apple earnings on tap.<\/p>\n

About midway through last week\u2019s Federal Open Market Committee press conference, Chair Jerome Powell started talking at length about how the central bank could shift to cutting interest rates.<\/p>\n

\n

\u201cThe federal funds rate is at a restrictive level now. So, if we see inflation coming down credibly, sustainably, then we don\u2019t need to be at a restrictive level anymore, we can, you know, we can move back to a neutral level and then below a neutral level at a certain point,\u201d he said. Naturally, he added that the Fed \u201cof course would be very careful about that,\u201d but he continued: \u201cyou\u2019d stop raising long before you got to 2% inflation and you\u2019d start cutting before you got to 2% inflation too.\u201d<\/p>\n

That\u2019s a useful backdrop for the latest macro advice coming from Goldman Sachs, on how to trade a soft landing. Economist Spencer Hill finds that the stock market sensitivity to inflation news is now 12 times the historical norm.<\/p>\n

\u201cWe view the market\u2019s outsized focus on inflation data as consistent with our forecast of a hold at both September and November meetings, because we expect a further decline in inflation to more than offset resilient labor market data and continued positive GDP growth in the eyes of the Fed. Looking further ahead, we continue to expect above-average sensitivity to price and wage data, because progress on the \u2018last mile\u2019\u2014the task of lowering inflation into the low-to-mid 2% range\u2014will be crucial for the FOMC\u2019s decisions to stop hiking and eventually begin cutting,\u201d he says.<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

But even as the market gets excited by the idea of a soft landing, growth surprises aren\u2019t well received. One recent example was the June retail sales report, which generated a strongly negative reaction in S&P futures over the next 30 minutes. In fact what markets are doing is returning to a \u201cbad is good\u201d reaction. \u201cAs fears of an imminent hard landing abate, equity investors may actually prefer soft growth data\u2014because growth above the 1-2% channel of 2022 would make additional rate hikes more likely,\u201d says Hill.<\/p>\n

That of course is not the first time Wall Street has reacted more positively to bad data than good, with Hill saying summer 2023 has echoes of 2000 and early 2001. \u201cWe expect these \u2018perverse\u2019 equity reactions to growth data to continue as long as recession fears are on the back burner and the Fed maintains an active tightening bias\u2014which is to say, \u2018live\u2019 meetings,\u201d said Hill.<\/p>\n

Keep the bad is good mantra in the back of your mind as the ISM manufacturing report and job openings data gets released on Tuesday and the nonfarm payrolls report gets unleashed on Friday.<\/p>\n

The markets<\/h2>\n
<\/p>\n
<\/p>\n<\/figure><\/div>\n

U.S. stock futures
\n ES00,
\n +0.11%<\/bg-quote><\/p>\n

NQ00,
\n +0.04%<\/bg-quote>
\n were steady, capping off a month in which the S&P 500
\n SPX,
\n +0.99%<\/bg-quote>
\n so far has gained 3%. Crude oil futures
\n CL00,
\n +0.81%<\/bg-quote>
\n were trading above $80 a barrel, while the yield on the 10-year Treasury
\n TMUBMUSD10Y,
\n 3.970%<\/bg-quote>
\n was just shy of 4%.<\/p>\n

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to\u00a0MarketDiem by Investor\u2019s Business Daily.<\/strong><\/p>\n

The buzz<\/h2>\n

The Fed\u2019s senior loan officer survey, due at 2 p.m. Eastern. highlights the economic calendar that also includes Chicago PMI. Minneapolis Fed President Neel Kashkari said the central bank has been surprised how resilient the economy has been. <\/p>\n

Walmart
\n WMT,
\n +0.47%<\/bg-quote>
\n is paying $1.4 billion to boost its stake in Indian e-commerce company Flipkart.<\/p>\n

Trucking company Yellow Corp. could file for bankruptcy as early as this week, The Wall Street Journal reported. <\/p>\n

Best of the web<\/h2>\n

Niall Ferguson on the potential death of summer as temperatures rise. <\/p>\n

Etsy
\n ETSY,
\n +4.07%<\/bg-quote>
\n has been withholding more of its seller funds than other platforms, a report says. <\/p>\n

Russian propaganda is making its way into Minecraft and other popular video games. <\/p>\n

Top tickers<\/h2>\n

Here are the most active stock-market tickers as of 6 a.m. Eastern.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\n Ticker<\/p>\n<\/td>\n\n Security name<\/p>\n<\/td>\n<\/tr>\n
\n TSLA,
\n +4.20%<\/bg-quote>\n <\/td>\n		\n Tesla<\/p>\n<\/td>\n<\/tr>\n
\n NIO,
\n +11.33%<\/bg-quote>\n <\/td>\n		\n Nio<\/p>\n<\/td>\n<\/tr>\n
\n AMC,
\n +2.65%<\/bg-quote>\n <\/td>\n		\n AMC Entertainment<\/p>\n<\/td>\n<\/tr>\n
\n PLTR,
\n +10.28%<\/bg-quote>\n <\/td>\n		\n Palantir Technologies<\/p>\n<\/td>\n<\/tr>\n
\n TUP,
\n +3.70%<\/bg-quote>\n <\/td>\n		\n Tupperware Brands<\/p>\n<\/td>\n<\/tr>\n
\n NVDA,
\n +1.85%<\/bg-quote>\n <\/td>\n		\n Nvidia<\/p>\n<\/td>\n<\/tr>\n
\n AAPL,
\n +1.35%<\/bg-quote>\n <\/td>\n		\n Apple<\/p>\n<\/td>\n<\/tr>\n
\n XPEV,
\n +15.68%<\/bg-quote>\n <\/td>\n		\n Xpeng<\/p>\n<\/td>\n<\/tr>\n
\n SOFI,
\n +5.06%<\/bg-quote>\n <\/td>\n		\n SoFi Technologies<\/p>\n<\/td>\n<\/tr>\n
\n GME,
\n -1.31%<\/bg-quote>\n <\/td>\n		\n GameStop<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

The chart<\/h2>\n
<\/p>\n
<\/p>\n<\/figure><\/div>\n

Speaking of the death of summer, the broker eToro put together a basket of stocks to benefit from extreme weather, comprised of names including Home Depot
\n HD,
\n +0.50%<\/bg-quote>
\n (for home repairs) and Carrier Global
\n CARR,
\n +3.95%<\/bg-quote>
\n (air conditioning). As the chart shows, the basket has been outperforming the S&P 500. <\/p>\n

Random reads<\/h2>\n

Nasa has accidentally lost contact with the Voyager 2 spacecraft, at least for a few months but possibly forever, after sending erroneous commands. <\/p>\n

These worms have been revived after 46,000 years of permafrost. <\/p>\n

Only in Japan, a man spends $14,000 to look like a collie. <\/p>\n

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern. <\/strong><\/p>\n

Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton. <\/strong><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s arguably the last important week for the stock market this summer (with the possible exception of the Jackson Hole Fed gathering at the end of August) with payrolls data as well as Amazon and Apple earnings on tap. About midway through last week\u2019s Federal Open Market Committee press conference, Chair Jerome Powell started talking […]<\/p>\n","protected":false},"author":1,"featured_media":42506,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-42505","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nFor the stock market, bad news is back to being good. 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