(Bloomberg) – US stocks, up 25% in three weeks, were in turmoil on the eve of the profit season, as benchmark futures fell in holiday-lit trade.
June contracts for the S&P 500 fell 2.2%, wiping out a 1.4% gain and reducing the 12% increase last week, the largest since the 1970s. The decline occurred even as the world’s major oil producers have agreed to cut global oil production by almost a tenth, ending a price war between Saudi Arabia and Russia. Equity futures fell 0.9% at 7:04 p.m. in New York. Crude West Texas Intermediate has changed little.
Corporate reports expected in the coming weeks will provide investors with some of the most vivid details to date of the devastation wreaked by the coronavirus on the US economy. Corporate profits of the S&P 500 are expected to fall by more than 11% from a year ago, according to analyst consensus compiled by Bloomberg, although many forecasts are out of date and the downside may be worse.
The profit season promises a multitude of new challenges. In addition to dealing with messy and sometimes meaningless estimates, investors are looking for a reading of everything from credit risk to supply chain integrity and consumer demand at a time when most of the population Wall Street worker works from home. While the 17.6% drop in the S&P 500 since mid-February came at a fairly economic price, US stocks are still trading at relatively rich valuations based on existing earnings projections for the next 12 months.
“It will be a market that will develop for some time. Everything is traded on non-fundamental data, it’s all data related to the viruses the markets are currently trading in, “said Jeremy Bryan, portfolio manager at Gradient Investments, which has approximately $ 2.6 billion in assets under management.
Extreme volatility has been the rule in world markets for two months, as traders struggle to assess the impact of the virus and efforts to contain it. Minneapolis Fed Bank President Neel Kashkari said on Sunday that without effective therapy and a vaccine, the US economy could face 18 months of consecutive shutdowns as the epidemic recedes and recurs.
US stocks are coming out of their best week since 1974. Investors looked beyond the staggering jobless numbers and focused on new Federal Reserve stocks to cushion the fallout from the coronavirus. Oil plummeted as investors said the supply-limiting proposal was insufficient. Anthony Fauci, director of the United States National Institute of Allergy and Infectious Diseases, said that the deaths in the United States of Covid-19 could be much less than previous projections.
“I hope against all hope that this thing will turn around very quickly, but the reality is that I think we are over a longer period of time,” said David Harden, CIO at Summit Global Investments.
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